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Coinpaper 2026-07-29 20:23:47

Meta Stock Crashes 9% After Earnings as AI Spending Overshadows Revenue Growth

Meta Platforms stock plunged around 9% in after-hours trading Wednesday as investors looked past strong revenue growth and focused on the enormous cost of the company’s artificial intelligence expansion. Meta reported second-quarter revenue of about $60.8 billion, slightly above Wall Street expectations, as its core advertising business continued to grow. However, earnings of $6.18 per share fell well below analysts’ forecast of roughly $7.14 to $7.19. The initial decline became much sharper during the earnings call. Management’s comments suggested that Meta’s spending on data centers, AI chips, technical talent and computing capacity could remain elevated for considerably longer than investors had hoped. Meta’s AI Bill Overshadows Strong Advertising Growth Meta entered the report expecting 2026 capital expenditures of between $125 billion and $145 billion, up from its earlier forecast of $115 billion to $135 billion. The company said the increase reflected higher equipment prices and additional data-center capacity needed for future AI products. The problem is not that Meta’s advertising business is weakening. AI-powered recommendations and targeting tools are helping the company show users more relevant content and improve advertising performance across Facebook and Instagram. Instead, investors are questioning how much Meta must spend before those improvements produce returns large enough to justify the investment. Unlike Microsoft, Amazon and Alphabet, Meta does not currently operate a major cloud business capable of selling AI computing capacity directly to outside customers. Its AI returns therefore depend heavily on better engagement, stronger advertising results and future products such as business agents, smart glasses and Meta AI. That creates a difficult comparison between rapidly rising costs today and revenue opportunities that may take years to fully develop. Earnings Call Turns a Sell-Off Into a 9% Crash The size of the decline suggests investors heard little during the call to ease concerns about margins, free cash flow and the timing of AI monetization. Meta is effectively asking shareholders to accept another long investment cycle based largely on CEO Mark Zuckerberg’s long-term vision. That approach previously attracted criticism when Reality Labs accumulated tens of billions of dollars in losses while the metaverse produced limited revenue. The latest reaction does not mean Wall Street has lost confidence in Meta’s overall business. Its advertising operation remains one of the strongest in the technology sector. However, investors now appear less willing to reward revenue growth when expenses and capital requirements are rising even faster. Fed Decision Adds Pressure to Meta Stock Meta’s earnings arrived shortly after the Federal Reserve kept interest rates unchanged at 3.50% to 3.75% . Three policymakers voted for a quarter-point increase, adding to concerns that rates could remain high or even rise again if inflation stays elevated. Higher interest rates are particularly damaging for expensive growth stocks because they reduce the present value of profits expected years into the future. Meta must now prove that its historic AI spending can translate into stronger earnings rather than simply higher infrastructure costs. Until that evidence becomes clearer, the stock could remain vulnerable despite the continued strength of its advertising business.

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