Meta Platforms (META) is currently navigating a period of uncertainty as its stock fell about 6% in after-hours trading following the release of its first-quarter earnings report. Despite reporting earnings per share (EPS) of 10.44 on revenue of 56.3 billion, the company’s plans to significantly increase its AI spending have raised concerns among investors and analysts alike.
A year ago, Meta’s forecasts for 2025 projected total spending in a range of 113 billion to 118 billion. However, the new capital expenditures forecast for 2026 now stands between 125 billion and 145 billion, reflecting expectations for higher component pricing and additional data center costs to support future capacity. This increase in AI spending comes at a time when overall expenses for the year are expected to reach between 162 billion and 169 billion.
Despite these concerns, Meta announced a 4% increase in daily active users to 3.56 billion, which analysts estimate contributed to first-quarter revenue growth of more than 30% year-over-year to approximately 55.55 billion. The company also plans to cut 8,000 workers, or about 10% of its workforce, as part of efforts to offset these investments.
The response from Wall Street has been mixed; while all 20 analysts tracked by Visible Alpha rate Meta stock as a ‘buy’ with an average price target of $865, some analysts express caution regarding the sustainability of profit margins given the increased costs associated with AI development. Oppenheimer analysts noted that although Meta is likely to report strong revenue growth, limited profit upside may arise due to higher compute costs for its AI models potentially offsetting revenue gains.
This volatility is not unprecedented; Meta’s stock has moved more than 10% following earnings reports in three of the last four quarters. Observers suggest that this pattern indicates underlying investor apprehension about how rising costs will impact future profitability, particularly given the heightened focus on AI spending.
The market reaction reflects a broader concern regarding how tech companies balance investment in innovation against profitability. As Meta adjusts its operational strategies amidst these changes, the implications for its stock performance remain uncertain.
