Meta (META) Shares Plunge 8% Despite Earnings Win on AI Spending Surge

Quick Summary

• Meta exceeded Q1 2026 profit forecasts, reporting EPS of $10.44 compared to analyst estimates of $6.67
• Quarterly revenue reached $56.3 billion, representing a 33% year-over-year increase
• 2026 capital expenditure forecast elevated to $125B–$145B range from prior $115B–$135B outlook
• Shares declined approximately 8% during premarket hours following the earnings announcement
• The company executed zero share buybacks this quarter, contrasting with nearly $13B in repurchases last year

Meta Platforms delivered impressive first-quarter results, yet investors responded with a selloff. Shares tumbled roughly 8% in Thursday’s premarket session after the social media giant announced an upward revision to its annual capital spending forecast.

Meta Platforms, Inc., META

The financial results themselves were undeniably robust. Meta reported earnings of $10.44 per share alongside revenue totaling $56.31 billion. Analyst consensus had projected $6.65 earnings per share on $55.52 billion in sales. The top line represented a 33% surge versus the year-ago period.

One important caveat: the earnings figure received a substantial lift from an $8.03 billion tax benefit. Excluding this one-time gain, adjusted earnings per share lands at $7.31—still comfortably above forecasts, but representing a more modest beat than the headline figure suggests.

The primary concern driving the stock decline centered on capital expenditure projections. Meta increased its 2026 spending outlook to a bracket of $125 billion to $145 billion, elevated from the previously communicated $115 billion to $135 billion range. The new midpoint of $135 billion represents a $10 billion jump from the prior forecast.

Management attributed the spending increase to rising costs for hardware components and expanded data center infrastructure. The Wall Street Journal previously reported that Meta had been extending the operational lifespan of certain server hardware due to memory chip supply constraints.

Rising Investments Compress Cash Generation

The accelerated spending trajectory is creating pressure on free cash flow generation. Additionally, Meta abstained from any stock repurchase activity during the quarter. This marks a significant departure from typical behavior—the company allocated nearly $13 billion toward buybacks throughout 2025.

Regarding user metrics, Meta’s family of applications recorded an average of 3.56 billion daily active users during March, reflecting 4% annual growth. The figure experienced a modest sequential decline, which Meta explained was due to internet connectivity issues in Iran and limited WhatsApp availability in Russia.

Advertising metrics delivered encouraging trends. Meta increased ad impressions by 19% while simultaneously achieving 12% higher average prices per ad. This dual improvement underscores the effectiveness of its AI-powered engagement algorithms and targeting capabilities.

CEO Commentary

Mark Zuckerberg characterized the period as a “milestone quarter,” highlighting robust engagement across applications and the debut of the initial model from Meta Superintelligence Labs.

Full-year operating expense guidance remains unchanged at $162 billion to $169 billion. Looking to Q2 2026, Meta projected revenue between $58 billion and $61 billion—with the midpoint of $59.5 billion trailing slightly behind Wall Street’s $59.6 billion consensus estimate.

Meta also acknowledged continuing legal and regulatory challenges across both European Union and United States jurisdictions as potential obstacles to business operations and financial performance.

The second-quarter revenue guidance midpoint of $59.5 billion falls marginally short of analyst expectations.

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