Meta Platforms (NASDAQ:META) experienced a 2.7% decline in its stock price on Friday, with shares trading at $646.66 in early afternoon activity. The drop came as the company's projected midpoint for capital expenditures in 2026 surpassed its anticipated operating cash flow for 2025, drawing scrutiny from investors.
The broader market also faced headwinds, with the Nasdaq Composite losing 1.2%, led by notable weakness in communication-services stocks. However, Meta's decline was steeper than the overall market, reflecting specific concerns about its capital spending trajectory.
Meta's 2026 capital expenditure midpoint stands at $135 billion, while operating cash flow last year totaled $115.80 billion. This means planned capex exceeds the total expected 2025 cash inflow by $19.20 billion, representing 117% of the company's 2025 operating cash flow. Although this does not necessarily indicate a cash shortfall—operating cash flow may rise this year—the comparison highlights the challenge Meta faces in funding its ambitious infrastructure expansion.
“Cash flow is starting to be almost completely drained by capex,” said Alberto Conca, chief investment officer at LFG+ZEST, referring to hyperscalers. The data underscores the large shift in Meta's funding needs, as revenue from advertising must support nearly twice as much annual capital expenditure.
Financial Metrics in Focus
Meta reported a 33% increase in first-quarter revenue, reaching $56.31 billion. Advertising accounted for $55.02 billion of that amount, representing 97.7% of total revenue. Ad impressions climbed by 19%, while average prices were up 12%. These improvements continue to represent the most reliable short-term funding method for Meta's infrastructure expansion.
However, the financial strain is apparent. Capital expenditure for the first quarter totaled $19.84 billion, while free cash flow, as defined by the company, stood at $12.39 billion. The company's 2025 capital spending was $72.22 billion, equivalent to 62% of its operating cash flow.
Chief Financial Officer Susan Li stated in January that “Those investments have generally paid off,” referring to prior advertising and engagement initiatives. The drop on Friday indicates investors are seeking new proof of returns on the escalating spending.
Outlook and Risks
Meta continues to project 2026 operating income above last year's figure. The company kept its full-year expense forecast unchanged at $162 billion to $169 billion. For the second quarter, Meta has forecasted revenue between $58 billion and $61 billion, with results to be announced after markets close on Wednesday, July 29.
Risks cited include softer advertising demand, increased costs for components, and potential legal hurdles. Meta has cautioned that ongoing U.S. youth cases may lead to a significant financial loss. Meta shares, priced at $646.66, are trading at about 23.5 times reported earnings. Beyond the valuation multiple, cash conversion remains a key issue for investors.
The company's commitment to large-scale AI investments, including a $50 billion AI campus, has put its 2026 cash flow in focus. As Meta balances its spending with revenue growth, the market will be closely watching upcoming earnings for signs of sustainable returns on these massive investments.
