Meta Platforms (META) is experiencing a turbulent moment in the stock market, with its shares dropping 6% in after-hours trading following a robust earnings report for the first quarter. Despite reporting an impressive earnings per share (EPS) of $10.44 on revenue of $56.3 billion, investors are wary of increased capital expenditures related to artificial intelligence (AI) initiatives.
A year ago, Meta had forecasted total spending between $113 billion and $118 billion for 2025. Now, the company has raised its capital expenditures forecast for 2026 to between $125 billion and $145 billion. This shift reflects expectations for higher component pricing and additional data center costs necessary to support future capacity.
Wall Street analysts had anticipated adjusted earnings of $8.15 per share on revenue of $55.5 billion. However, excluding an $8 billion one-time tax benefit, Meta’s EPS would have been only $7.31. Analysts estimate that Meta’s revenue grew more than 30% year-over-year, indicating strong performance despite concerns over profitability.
Key statistics from the earnings report:
- Daily active users increased by 4%, reaching 3.56 billion
- Overall expenses are projected to hit between $162 billion and $169 billion for the year
- The company plans to cut 8,000 workers, representing about 10% of its workforce, to offset these investments
The mixed results have led to varied analyst ratings. All 20 analysts tracked by Visible Alpha rate Meta stock as a “buy,” with an average price target of $865. Yet, Oppenheimer analysts caution that while strong revenue growth is likely, limited profit upside may arise due to higher compute costs associated with Meta’s AI models.
This volatility in stock performance follows a pattern—Meta’s shares have moved more than 10% following earnings in three of the last four quarters. Observers note that such fluctuations reflect broader market sentiments and specific concerns about Meta’s long-term strategy amidst rising operational costs.
The outlook remains uncertain as Meta navigates these challenges. As one analyst remarked, “Meta shares look ‘iffy’ into earnings.” The company’s ability to balance investment in AI with profitability will be closely watched in the coming months.
