Shares of the social media heavyweight were set to wash out more than $100 billion from the market cap at the opening bell.
📉 AI Bills Keep Piling Up
- Meta shares dropped 7.5% in after-hours trading, putting more than $100 billion of market value on track to disappear at the opening bell.
- The social media giant reported earnings per share of $6.18, missing Wall Street's estimate of $7.19 and falling . The miss came despite another quarter of strong advertising demand.
- Revenue climbed 28% year over year to a record $60.8 billion, edging past analysts' expectations of $60.2 billion. Advertising remains Meta's cash machine, with AI continuing to improve ad targeting and engagement.
💸 Costs Steal the Headlines
- Investors were hoping for more clarity on Meta's AI roadmap. Instead, they got another reminder that building an AI empire doesn't come cheap.
- The company raised the low end of its 2026 capital expenditure forecast to $130 billion-$145 billion, up from $125 billion-$145 billion previously.
- Several one-off expenses also weighed on profits, including a $2.4 billion legal charge, $1.2 billion in severance costs and a 67% jump in research and development spending as Meta accelerated investment in AI.
- Capital expenditure, or capex, is money spent on long-term assets such as data centers, servers and networking equipment. Those investments may drive future growth, but they also reduce profits and cash flow today.
🤖 Zuckerberg Stays All In
- CEO Mark Zuckerberg defended the company's aggressive AI strategy, arguing that personalized AI assistants capable of handling tasks around the clock will become a core part of Meta's future products and business model.
- Convincing Wall Street will take more than that. Investors increasingly want evidence that massive AI spending will translate into higher earnings rather than simply bigger infrastructure bills.
- Meta shares had already fallen 11% this year before the earnings release, even as the Nasdaq gained about 5% over the same period.