Meta pointed to growth in its second-quarter advertising business, but it did not allay market concerns about large-scale artificial intelligence (AI) investment.

On July 30, Business Insider reported that Meta shares at one point fell nearly 10 percent in after-hours trading after its earnings release.

The key was not the earnings themselves but the explanation of AI investment. Meta said AI helped expand its advertising business. Advertising revenue rose 27 percent and ad impressions increased 14 percent. The average price per ad also climbed 12 percent. The market, however, focused more on the burden that AI investment costs place on cash flow than on that growth.

Meta's AI-related spending rose to $31.1 billion, about double last year. As a result, free cash flow plunged to $784 million from $8.55 billion. One analyst described Meta's AI strategy as "like throwing spaghetti at the wall." That means investors viewed Meta's increased spending as an uncertain bet rather than a growth investment.

Microsoft (MS), which reported earnings a day earlier, drew a different response. MS presented results for Azure and Microsoft 365 Copilot, and its AI budget outlook was unchanged from before. The market placed greater value on cost control and clearer monetisation prospects, and MS shares rose nearly 8 percent in after-hours trading.

The difference between the two companies was clear. The share reaction was driven less by AI spending itself than by how directly and measurably that spending translates into results. Meta said AI is boosting its advertising business, but investors judged that was still not enough.

Meta CEO Mark Zuckerberg (Mark Zuckerberg) argued that AI investment needs more time. On an earnings conference call, he said AI has more immediate uses for developers, while consumer-facing services are "a little different." He also stressed that the market is a "huge market opportunity."

Meta is placing a big bet on AI agents based on platforms with billions of users, including Facebook, Instagram, WhatsApp and Threads. He said Meta is making major investments in AI agents. The plan is to leverage its existing social network base to take the lead in the consumer AI market.

The problem is that, separate from user numbers, public wariness about AI remains. Some point out that anxiety about AI is not small in the United States. Meta, mindful of that, has been working to manage public opinion on AI through Zuckerberg's opinion pieces and media interviews.

In this situation, for Meta to regain investor confidence, it will likely need to show more clearly how AI can generate tangible revenue in businesses beyond advertising or in consumer services. The market is currently placing more weight on immediately verifiable results than on a long-term vision.