Meta Platforms (NASDAQ:META) experienced a 2.6% decline in its stock price on Tuesday, closing at $627.17, as the company's updated capital expenditure guidance signaled a significant acceleration in spending. The stock has lost 8.0% over the past five trading sessions, reflecting investor concerns about the mounting costs associated with its artificial intelligence infrastructure buildout.
According to the company's 2026 outlook, Meta will need to nearly double its average quarterly capital expenditures to align with the midpoint of its full-year projection. After spending $19.84 billion in the first quarter, the company now expects total capital expenditures for the year to fall between $125 billion and $145 billion. The midpoint of $135 billion implies a remaining $115.16 billion to be deployed over the next three quarters, translating to an average of $38.39 billion per quarter—a staggering 94% increase compared to Q1's spending level.
This rapid ramp-up means that only 14.7% of the midpoint spending was accounted for in the first quarter. Investors will be closely watching Meta's second-quarter earnings report, scheduled for release after the market close on July 29, to gauge how much the spending rate has accelerated. The company's free cash flow, which stood at $12.39 billion in Q1, provides a substantial buffer but is not without limits given the magnitude of the planned outlays.
The broader technology sector is under similar scrutiny. Alphabet Inc. (NASDAQ:GOOGL) underscored the risks after Wednesday's close, raising its 2026 capital expenditure outlook to a range of $195 billion to $205 billion. While Google Cloud posted an 82% increase in revenue, Alphabet reported negative quarterly free cash flow of $5.9 billion, sending its shares down nearly 5% in after-hours trading. CFO Anat Ashkenazi noted that "demand still outpaces that investment," but the implication remains cautious: strong demand may not be sufficient to secure near-term cash flow.
Meta's overall budget is smaller than Alphabet's, but relative to its revenue, the burden is heavier. Meta's midpoint capex of $135 billion represents 67% of its projected 2025 revenue of $201.0 billion, compared to Alphabet's comparable figure of around 50% ($200 billion midpoint vs. 2025 revenue of $402.8 billion). This higher spending intensity underscores the financial pressure Meta faces as it scales its AI infrastructure.
Despite the spending concerns, some analysts remain optimistic. Rothschild & Co Redburn analyst Dominic Ball raised his price target on Meta to $1,000 from $900, maintaining a Buy recommendation. The optimism is backed by Meta's advertising business, which saw first-quarter revenue rise 33%, ad impressions grow 19%, and average ad prices advance 12%. Initial external projections point to quarterly revenue of $60.21 billion, with consensus EPS estimates ranging from $7.19 to $7.20. Meta's own revenue outlook stands at $58 billion to $61 billion.
Investors will scrutinize the July 29 earnings report for key metrics including second-quarter capital expenditures, advertising growth trends for the second half of the year, and the trajectory of free cash flow. The conference call is scheduled to begin at 4:30 p.m. ET.
Meta also faces ongoing legal risks. A Florida teenager recently withdrew a lawsuit against the company without settlement, but over 3,300 comparable cases are pending in California state court and 2,600 more at the federal level. Meta has warned that legal challenges related to young users could lead to significant financial loss.
