Meta Shares Fall After Zuckerberg Announces Higher AI Spending Through 2026

The race to dominate artificial intelligence is testing investor patience across the tech sector. While massive infrastructure outlays have driven major indices to record highs, Meta Platforms Inc. experienced a severe market reaction after reporting financial results that revealed surging operational costs and soaring capital expenditures.

Surging Operational Costs and Capital Expenditure Forecasts

During Meta’s third-quarter earnings report, the company disclosed that operational expenses jumped 55%, severely impacting free cash flow by 91% down to a modest 800 million dollars. Capital expenditure for the period reached 30.000 millones dollars, representing roughly half of Meta’s total revenue. Compounding investor anxiety, the company updated its full-year capital expenditure forecast to a range between 70 mil millones and 72 mil millones dollars for 2025.

The market response was immediate and harsh. Meta shares sank more than 10% in after-hours trading, eventually closing down 7.5% following a 1.3% dip during regular trading hours. The sell-off deepened further the following day, dragging the stock down by 10% to change hands at 677 dollars on Wall Street.

Mark Zuckerberg Defends Infrastructure Outlays and Cloud Expansion

Chief Executive Officer Mark Zuckerberg defended the aggressive spending strategy during the earnings call, framing the massive data center buildout as a necessary preemptive measure to capture future demand. He argued that if the company over-builds, the surplus computing capacity can easily be absorbed internally or monetized externally.

Zuckerberg added that external parties regularly approach the company requesting API access or different computing capabilities. In an exclusive interview, Zuckerberg noted that exploring an AI cloud rental business makes strategic sense when outside offers for compute resources reach exceptionally high levels.

Adding to its infrastructure footprint, Meta and BlackRock announced an agreement to construct a massive 1-gigawatt data center in Texas valued at 14.000 millones dollars. BlackRock will hold an 80% stake in the project, while Meta will retain the remaining 20%.

Analyst Reactions and Wall Street Price Target Reductions

Major financial institutions quickly adjusted their outlooks following the earnings announcement. Justin Post, an analyst at Bank of America Global Research, lowered his price target for Meta from 900 to 810 dollars while maintaining a buy recommendation. KeyBanc Capital Markets analyst Justin Patterson reduced his price target from 905 to 875 dollars with an overweight rating, and TD Cowen analyst John Blackledge lowered his target from 875 to 810 dollars while keeping a buy rating.

Industry experts pointed out that while Meta’s core business continues to perform well, soaring expenditures across all divisions are weighing heavily on sentiment.

That friction is visible on the balance sheet. Reality Labs reported another 4.000 millones dollar loss, continuing its unyielding streak of red ink without signs of deceleration. On the revenue side, however, Zuckerberg noted that Meta’s AI-driven advertising tools have reached an annualized run rate of 60.000 millones dollars, offering concrete proof that the multi-billion-dollar investments are starting to generate tangible financial returns.

Contrasting Strategies Between Meta and Microsoft

The market’s anxious reaction to Meta stood in sharp contrast to the reception received by Microsoft during the same earnings window. Microsoft reported capital expenditures of 35.800 millones dollars for its quarter—representing roughly 40% of its revenue—yet its operational expenses grew by only 10%, allowing operating income to climb 18% to 40.600 millones dollars. Microsoft shares gained up to 9% in after-hours trading.

While both tech giants are spending heavily on artificial intelligence infrastructure, Microsoft’s ability to constrain operating costs while expanding cloud revenue—with Azure surpassing 100.000 millones dollars for the fiscal year—reassured investors in a way Meta’s heavy-spending model has yet to achieve.