Meta Plunges 6% After-Hours as Massive AI Spending Hike Spooks Investors
Meta Platforms shares tumbled 6.64% in after-hours trading Wednesday, sharply underperforming a flat S&P 500 despite reporting first-quarter results that beat analyst estimates on both the top and bottom lines. The sell-off was fueled by a significant $10 billion increase in the company's full-year capital expenditure guidance, signaling that its aggressive push into artificial intelligence will be far more costly than Wall Street had anticipated.
The Capex Shock
The primary catalyst for the sharp decline in extended trading was Meta's decision to hike its 2026 capital expenditure forecast. Management now expects to spend between $125 billion and $145 billion this year, up from a previous range of $115 billion to $135 billion. The company cited higher component pricing and accelerated data center construction as the primary drivers for the increase.
This move caught investors off guard, as the stock had already climbed 27% over the past month on expectations of continued margin expansion. The revised guidance suggests that Meta's 'Year of Efficiency' has firmly transitioned into a cycle of massive infrastructure investment, raising concerns about near-term free cash flow. While CEO Mark Zuckerberg emphasized that the company is on track to deliver 'personal superintelligence' to billions of people, the market focused on the immediate $10 billion price tag added to the budget.
Earnings Distortion: The $8 Billion Tax Tailwind
While Meta reported a headline earnings per share (EPS) of $10.44—well above the $6.82 consensus—the figure was significantly inflated by a one-time $8.03 billion income tax benefit related to U.S. tax law changes. Excluding this non-recurring benefit, adjusted EPS was approximately $7.31. While still a beat against expectations, the adjusted figure provided a less dramatic 'blowout' than the initial headline suggested, contributing to the revaluation after the close.
Revenue for the quarter came in at $56.31 billion, representing a robust 33% year-over-year increase and surpassing the $55.5 billion analyst forecast. This growth was driven by a dual-engine performance in the advertising business: ad impressions grew 19%, while the average price per ad rose 12%.
User Growth Headwinds and Sector Context
Despite the revenue strength, Meta's user metrics showed signs of friction. Family Daily Active People (DAP) reached 3.56 billion, a 4% increase year-over-year, but a slight sequential decline from the previous quarter. Management attributed the dip to internet disruptions in Iran and restrictions in Russia, but the miss against the 3.62 billion expectation added to the bearish sentiment in the after-hours session.
Meta's plunge of 6.64% stands in stark contrast to the broader market, with the SPY remaining flat at 0.00% during the same period. The divergence highlights a growing sensitivity among tech investors toward AI-related spending. While the core advertising business remains healthy, the market is currently unwilling to grant Meta a 'blank check' for its AI ambitions, especially as capital intensity reaches historic levels.
Forward-Looking Perspective
Looking ahead, Meta provided Q2 revenue guidance of $58 billion to $61 billion, which is largely in line with Wall Street's expectations. However, the focus for the coming quarters will remain squarely on the return on investment (ROI) for its AI infrastructure. Zuckerberg will face continued pressure to prove that the massive capital outlays are translating into tangible product improvements and superior ad targeting before the stock can reclaim its recent highs.
Key Takeaways
- Meta raised its 2026 capital expenditure guidance to $125B-$145B, a $10 billion increase that spooked investors in after-hours trading.
- Headline EPS of $10.44 was heavily distorted by an $8.03 billion one-time tax benefit; adjusted EPS was closer to $7.31.
- Revenue grew 33% to $56.31 billion, beating estimates, but was overshadowed by the spending outlook and a slight miss in daily active users.
- The stock's 6.64% drop represents a significant divergence from the S&P 500, which remained flat after the market close.