Meta Platforms Inc. saw its stock decline approximately 5% in after-hours trading on Wednesday, as the company's updated capital expenditure guidance for 2026 overshadowed a strong earnings report. The social media giant now expects 2026 capital spending to reach between $125 billion and $145 billion, up from its previous range of $115 billion to $135 billion, signaling continued heavy investment in artificial intelligence infrastructure.
Earnings Surpass Expectations
For the first quarter, Meta reported revenue of $56.31 billion, a 33% increase year-over-year and above the analyst consensus of $55.45 billion, according to LSEG data. Net income hit $26.77 billion, boosted by an $8.03 billion tax benefit. Diluted earnings per share came in at $10.44, though without the tax benefit, EPS would have been $3.13 lower. The company guided second-quarter revenue in the range of $58 billion to $61 billion, roughly in line with the $59.5 billion estimate.
AI Investment Takes Center Stage
Meta's capital spending surge reflects its commitment to AI, with data centers, chips, and other assets requiring substantial investment. Chief Executive Mark Zuckerberg highlighted 'strong momentum across our apps' and the debut of Meta Superintelligence Labs' first model, aiming to 'deliver personal superintelligence to billions of people.' Chief Financial Officer Susan Li attributed the higher capex guidance to 'higher component pricing' and additional data center spending to boost future capacity.
Advertising Business Remains Robust
Meta's advertising business continues to fuel its AI ambitions. Ad impressions across its apps rose 19% year-over-year, while the average price per ad increased 12%. This dual growth in volume and pricing underscores the strength of Meta's ad platform. According to Emarketer, Meta is projected to surpass Alphabet in global online ad revenue this year, with $243.46 billion compared to Alphabet's $239.54 billion, excluding traffic acquisition costs.
User Growth and Market Context
Family daily active people across Meta's apps—including Facebook, Instagram, and WhatsApp—grew 4% year-over-year to 3.56 billion. The company kept its full-year expense forecast steady at $162 billion to $169 billion. However, the after-hours stock decline highlights investor caution around AI spending, with many seeking evidence of returns. Wedbush analyst Dan Ives called this a 'prove it' moment for AI, labeling Meta as one of the clearer AI monetization plays among Big Tech.
Risks and Regulatory Challenges
Meta faces ongoing legal and regulatory issues on both sides of the Atlantic, including youth-focused investigations and upcoming U.S. trials that could result in significant losses. Forrester analyst JP Gownder noted that Meta is 'prioritizing capital investment over human loyalty,' with workforce reductions continuing alongside AI spending. Rising AI hardware costs or regulatory changes to the ad model could pressure margins before revenue catches up.
The broader market is watching closely, as Alphabet, Microsoft, Meta, and Amazon collectively plan around $600 billion in AI outlays this year. Investors are pushing for tangible returns rather than just spending headlines. 'What's the return on all the capital expenditure?' asked Joe Maginot, large-cap portfolio manager with Madison Investments.
