Meta shares plunged on Wednesday as investors balked at its promise to continue spending on artificial intelligence (AI) projects as profits decline.

Shares in the company behind Instagram and Facebook fell 11% after its results for the April-June quarter showed revenue grew 28% from a year earlier to $61bn (£45.6bn), while profits fell 14% to $6bn.

Meta said it would spend between $130 billion and $145 billion this year, mostly on artificial intelligence projects, up from the $125 billion it said it planned to spend just three months ago.

Chief Executive Mark Zuckerberg said the company’s AI spending was “accelerating every part of our core business” and that it planned to start selling the technology to other companies.

Susan Li, Meta’s chief financial officer, told financial analysts that selling its technology to other companies would help it boost the profitability of its AI spending.

“By 2028 we will have changed many cards,” he said.

These types of business lines have not yet materialized. Meta’s free cash flow for the quarter, what it maintained after paying for its operations, was $784 million, the lowest level of the metric it has recorded in at least five years, according to its financial records.

“What it generated in cash this quarter was almost all eaten up by spending on AI infrastructure,” said Forrester analyst Mike Proulx. “Investors now have to decide whether Meta’s growing list of AI initiatives represents a diversification for the company or a distraction.”

“There’s a bit of similarity to Meta’s metaverse failures in that Meta is once again spending ahead of proven product demand,” Proulx added, referring to Meta’s previous spending of tens of billions of dollars on virtual experiences that failed with users.

Last week, Google also reported the lowest amount of surplus cash in its history, sending its own stock tumbling.

“I understand this is a big industry-wide bet,” Zuckerberg said of AI spending. “My personal bet is that people who invest in this will feel great and will be rewarded over time.”

He said on the call that Meta’s AI capabilities and models were driving engagement on Instagram and Facebook and boosting the ability of smaller businesses to create advertising. Zuckerberg added that the company was developing AI agents, or AI chatbots that act somewhat autonomously.

These agents “will be the next wave of our product line in the months and years to come,” Zuckerberg said.

“We will soon have agents who can work 24/7 on your behalf,” Zuckerberg added during the call. “Great personal agents need to get to work right away. I’m very excited about this and we’ll have more to share soon.”

“We are the best company in the world at bringing experiences to billions of people,” he added.

As for Meta’s plans to sell AI models and computing tools to other companies for the first time, Zuckerberg said the first step is to make its Muse Spark AI model “easier for companies to integrate.”

“We hope to build a great business for great companies,” Zuckerberg said. “We have more coding tools and products on our roadmap.”

Although Zuckerberg said the move would show “different muscle than we’ve had historically,” he said the financial opportunity was too big to ignore.

“It’s not just about selling computing; it’s API services and productivity services and I think there’s a very, very big opportunity there and we’re pretty focused on that.”

Microsoft also reported its quarterly and annual results on Wednesday and bucked a downward trend in technology stocks, with shares rising 5% in after-hours trading.

Its positive reception by Wall Street demonstrated that even huge spending on AI can be acceptable to investors when it is not accompanied by a lack of clear financial returns.

Microsoft’s sales for the three months from April to June rose 18% to $90 billion, and profits rose 31% to $36 billion.

Microsoft is also one of the largest investors in OpenAI, and CEO Satya Nadella used a call with analysts to address the AI ​​company’s recent issues with its models inappropriately violating other companies’ technical operations.

“The most important thing to take away from this is that you can’t rely on any particular model,” Nadella said.

Microsoft Chief Financial Officer Amy Hood said its capital spending for all of next year would be $175 billion, mostly related to AI and its infrastructure. That’s less than the $190 billion it spent in the year through June.