Shares of Meta Platforms, the parent company of Facebook and Instagram, fell as much as 11% after the company reported quarterly results that beat revenue expectations but rattled investors with the scale of its planned artificial intelligence spending and a sharp collapse in free cash flow.
Meta reported revenue of 60.8 billion dollars for the quarter, up 28% from a year earlier and ahead of analyst forecasts. But earnings came in below expectations at 6.18 dollars per share, compared with the 7.22 dollars analysts had projected, weighed down in part by a 2.4 billion dollar legal charge and roughly 1.18 billion dollars in severance costs tied to restructuring.
The bigger shock for investors was Meta’s capital spending trajectory. The company said it now expects full-year 2026 capital expenditures of between 130 billion and 145 billion dollars, a dramatic jump from the 72.2 billion dollars it spent in 2025 and well above the range it had signaled just months earlier. Free cash flow collapsed 91% to roughly 784 million dollars for the quarter, as infrastructure spending consumed nearly all of the cash the company generated.
Chief Executive Mark Zuckerberg told analysts that AI investment was accelerating every part of Meta’s core advertising and social media business, from content recommendation to ad targeting, and said the company also plans to sell its AI technology and infrastructure capacity to other businesses, a potential new line of revenue akin to a cloud computing offering.
Chief Financial Officer Susan Li said that selling Meta’s AI technology to outside companies would help the company generate returns on its enormous AI investment over time. Li also flagged ongoing legal risk, warning that active legal and regulatory matters, including youth-safety related trials scheduled later this year in the United States, could significantly affect Meta’s business and financial results going forward.
The market reaction drew comparisons to Meta’s earlier spending spree on the metaverse, which cost the company tens of billions of dollars with little to show in revenue. Forrester analyst Mike Proulx said the pattern looked familiar, with Meta again spending heavily ahead of proven product demand rather than waiting for AI to demonstrate a clear return on investment.
The results land in the middle of a broader reckoning across the technology sector over whether AI spending is beginning to outpace the revenue it generates. Investors are now watching earnings from other major cloud and technology companies reporting results this week for signals on whether Meta’s spending surge is an outlier or the start of an industry-wide trend.
Meta’s stock had rallied for much of the past year on optimism about its AI ambitions, but Wednesday’s drop erased a significant chunk of those gains and underscored how quickly sentiment can shift when spending plans outstrip near-term profit expectations.
Sources: Variety, Fortune, Tech Times