Meta's shares fell 11% on Wednesday after the company reaffirmed plans to sharply increase spending on artificial intelligence even as profits declined. Investors reacted to signs that heavy AI investment is squeezing returns, echoing similar concerns that hit Google's shares the previous week, and raising questions about how long markets will tolerate ballooning capital expenditure without clear payoffs.

For the April-to-June quarter, Meta reported revenue up 28% year-on-year to $61bn (£45.6bn), but profit dropped 14% to $6bn. The company raised its 2026 spending forecast to between $130bn and $145bn, mostly for AI, up from the $125bn projected just three months earlier, while free cash flow fell to $784m, its lowest in at least five years. Chief executive Mark Zuckerberg defended the strategy, saying AI was boosting engagement and advertising tools across Facebook and Instagram, and outlined plans to develop autonomous AI agents and to start selling Meta's AI models and tools to other businesses, with finance chief Susan Li suggesting clearer returns would emerge "by 2028".