Meta Platforms saw its shares slide over 7% on Thursday, October 22, 2026, closing down $50.36 at $647.16. The significant drop followed the company's announcement of negative free cash flow for the third quarter and a revised, higher capital expenditure guidance for the full year. The market's reaction underscores growing investor scrutiny of Meta's aggressive spending on artificial intelligence (AI) infrastructure.
Meta's Ambitious AI Spending Plan
The tech giant has committed to substantial investments in computing infrastructure, data centers, and other resources essential for developing and deploying advanced AI models and services. Meta views AI as a critical catalyst for future growth across its core advertising business, social platforms, and emerging technology initiatives.
However, the sheer scale of this planned investment is exerting considerable pressure on Meta's near-term financial metrics. The company now expects full-year capital expenditure (capex) to range between $135 billion and $145 billion, raising the lower end of its previous forecast from $130 billion.
Financial Strain: Negative Free Cash Flow
For the third quarter, Meta reported a negative free cash flow of $2.12 billion. This figure indicates that the company's capital expenditures and other cash requirements surpassed the cash generated from its operating activities during the period. While negative free cash flow isn't always a red flag, especially for companies investing heavily in future growth, it raises questions among investors about the timeline for these AI investments to translate into sustainable cash flows and earnings growth.
Rising Credit Concerns Amid Investment Surge
The heightened spending outlook has also triggered credit concerns among some investors. Reports indicated that the spread on Meta's five-year credit default swaps reached a record high on Thursday. Wider spreads generally suggest that investors are demanding greater compensation for perceived credit risk, implying increased caution regarding the financial implications of Meta's expanding investment program.
In additional disclosures, Meta announced plans to create a new class of nonvoting Class C common stock. This move is aimed at preserving its founder-led structure and providing flexibility for future growth financing. Regulatory filings also touched upon the potential impact of a proposed California wealth tax on CEO Mark Zuckerberg, which could result in a multi-billion-dollar tax liability tied to his stock ownership.
Revenue Growth vs. Return on Investment
Despite the market's negative reaction, Meta's third-quarter revenue showed strength, increasing 26% year-on-year to $64.60 billion, surpassing analysts' expectations of $63.37 billion. However, the reported earnings-per-share of $3.83 was not directly comparable with the $5.75 forecast for the quarter.
The contrasting signals highlight the central challenge for Meta: demonstrating that its aggressive AI investment strategy will yield returns sufficient to justify the escalating costs. Shareholders will closely monitor capital expenditure trends, free cash flow, advertising growth, and concrete evidence that AI investments are enhancing profitability. While strong revenue growth remains encouraging, the market's recent reaction clearly indicates that investors are increasingly scrutinizing the cost of sustaining Meta's ambitious AI future.