Home / Business and Economy / Meta's Cash Flow: A Costly Illusion?
Meta's Cash Flow: A Costly Illusion?
23 Feb
Summary
- Stock awards consumed 96% of Meta's free cash flow last year.
- Meta doubled its debt to $58.7 billion to fund new data centers.
- A $27 billion data center project is kept off Meta's balance sheet.
Meta Platforms generated $43.6 billion in reported free cash flow last year, a figure that obscures significant cash costs. Stock-based compensation, including $18.4 billion in tax withholding and an estimated $23.6 billion for share buybacks to offset dilution, consumed $42 billion, or 96%, of this reported cash. This reality forced Meta to more than double its outstanding debt to $58.7 billion by the end of last year.
Furthermore, Meta is financing a substantial $27 billion data center project off its balance sheet through complex financial arrangements. These expenditures, particularly the cash costs tied to employee stock awards, are not captured in standard free cash flow calculations. Accounting experts suggest that a more accurate valuation requires including these significant operating costs.
This hidden cost structure impacts Meta's valuation, making its market value appear expensive relative to its true cash-generating ability. While other tech giants also incur stock-based compensation costs, Meta's are disproportionately larger as a percentage of free cash flow. The ongoing AI infrastructure build-out necessitates continued reliance on debt markets, posing a question for investors about the sustainability of Meta's growth strategy.
