The Briefing

Meta’s digital ad business is on fire. In the first half of this year, its ad revenues expanded 30%, double the rate of growth Google reported—astonishing for a company of Meta’s size (second-quarter ad revenues were $59 billion). There seems to be no doubt its ad business is benefiting from AI refinements to targeting and creative tools. On the second-quarter earnings call, CEO Mark Zuckerberg said 9 million small businesses were using at least one of Meta’s AI creative tools to make ads. 

The company projected a slight slowdown in overall growth for the third quarter, putting the high end of its growth range at 25%, compared with second-quarter growth of 28%. But most investors probably aren’t worrying too much about the top-line growth rate. They’re likely more focused on what Meta says about its spending. Analysts are projecting the company will report capital expenditures of $40.5 billion in the quarter—double the year-earlier number, according to S&P Global Market Intelligence. They estimate that will translate to negative free cash flow of $10.3 billion. By comparison, Meta reported free cash flow of $10.6 billion in last year’s third quarter. Analysts are projecting this will be the first of several quarters of negative free cash flow. 

Meta had $90 billion in cash and securities at June 30—thanks in part to recent bond offerings—so it has the runway to cover the cash burn for a good while. But it will likely have to raise more money eventually, either through another debt offering or by selling equity. If Meta can stay on investors’ good sides, an equity offering seems in the cards. 

Then There’s Tesla…

Also reporting on Wednesday is Tesla, Elon Musk’s second most important public company (it’s worth only $1.4 trillion, roughly $600 billion less than SpaceX). And this promises to be a downbeat quarter, at least compared to the second one, when Tesla reported 26% growth in revenue.

Tesla’s problem this time is that the quarter will compare unfavorably with the same period last year, when the expiration of the federal government’s electric vehicle tax credit gave Tesla a short-term boost to sales, interrupting an otherwise weak series of quarters. Tesla has already reported that deliveries in the third quarter fell 2% from the same period in 2025, which analysts expect to translate to a 0.6% lift in revenue for the quarter.

Not many investors care too much about Tesla’s sales right now. Musk’s pitch to his very loyal fan base is that Tesla is becoming a company that primarily makes humanoid robots and robotaxis, although Thursday’s reveal of its upcoming Roadster is giving longtime car customers something to look forward to. They do have to look forward, though—the Roadster won’t go into production until 2028. 

The biggest factor weighing on Tesla shares, though, is the likelihood of a Tesla-SpaceX merger. Musk has dropped several hints that such a deal is coming. Maybe we’ll hear something about that this week.

And Netflix…

Netflix’s third-quarter update, scheduled for Tuesday, has taken on extra importance in the light of recently reported layoffs at the company and the sudden departure late last week of chief content officer Bela Bajaria. She will be succeeded by Peter Rice, a former Disney and Fox executive.

Both the layoffs and Rice’s hiring are a reminder of how Netflix has become a big part of the Hollywood mainstream—which also means slower growth than it once posted. Netflix has projected 11.7% top-line growth for the third quarter, 4.5 percentage points lower than for the first quarter. Investors’ realization that the company has matured is likely one reason the stock has been falling all year.

Despite its steady slump—shares are down 25% so far this year—Netflix shares still trade at a big premium to rivals such as Walt Disney Co.—5.6 times forward revenue to Disney’s 2.2 times. Unless Netflix finds a way to accelerate growth, its valuation is likely to keep dropping. 

In Other News

• China is considering new export controls on AI technologies that could potentially restrict the overseas transfers of AI models and chip designs deemed strategically important. The Ministry of Commerce on Friday issued a draft plan to add 40 technologies across the AI, biomedicine and photovoltaic sectors to the list of restricted technologies.

• Microsoft pulled out of a planned U.K. data center that Nscale was building for it after the cloud provider faced delays accessing power to bring the site online. The cancellation is likely to weigh on Nscale’s planned public offering this month as investor concerns swirl over whether AI cloud providers can bring in revenue fast enough to pay their debts.

• Anthropic announced the creation of a new fund that it committed to giving at least 5% of its shares and that will support causes such as addressing the employment impact of AI. The Anthropic Public Benefit Fund could get an additional 2% of the company’s shares, at the board’s discretion, for every 50% increase in Anthropic’s valuation, according to a blog post. 

• Data center and neocloud executives are predicting more consolidation, saying there’s a limit to the number of AI cloud providers that can exist, even if Nvidia provides many of them with investment or backstops, The Information reported. 

Friday on The Information’s TITV

Check out Friday’s episode of TITV in which Akash Pasricha speaks with Brett Harrison, CEO of Architect, which is building an AI inference auction-based marketplace.

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