Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB) shares fell as much as 10% on Thursday morning after the company's third-quarter results left investors unconvinced that its massive artificial intelligence spending is translating into tangible returns.
Earnings per share came in at $6.18, well below the $7.22 analysts had expected, even as revenue of $60.8 billion topped forecasts of $60.17 billion. Meta's guidance for the current quarter also fell short, with the company projecting sales of $62.5 billion versus estimates of $63.15 billion.
Total costs rose 55% year-over-year to $42.03 billion, with more than $1 billion of that tied to severance pay following a round of layoffs.
On the earnings call, Meta CEO Mark Zuckerberg declined to offer specific capex guidance for 2027, saying infrastructure planning "remains highly dynamic."
"We're gearing our current infrastructure plans toward maximizing capacity in 2026 and 2027, while giving us the flexibility to continue growing in 2028 and beyond," he said.
Reality Labs, the division behind Meta's virtual reality headsets and wearable AI devices, reported a $4.6 billion loss on sales of $431 million for the quarter.
Zuckerberg said demand for AI compute continues to outstrip supply. "There's just nowhere near enough compute for all the demand," he said. "We're getting a large number of offers for the compute that we have, but we also have a lot of internal uses that we think are going to be quite valuable."
On financing its infrastructure buildout, Meta said it has been shifting toward more debt. "We've been evolving our capital structure in recent years to include a greater mix of debt as we work to bring down our cost of capital," the company said, adding it has "generally found it prudent to continue adding cost-efficient, long-duration sources of capital."
The selloff extends a difficult stretch for Meta stock, which had already fallen for 10 consecutive trading sessions heading into the results, its longest losing streak on record.
Analysts at BofA said the after-hours pressure did not appear to reflect weakening fundamentals, pointing to a 10% rise in time spent on Instagram and a third-quarter revenue outlook implying accelerating two-year growth. Instead, they attributed the drop to investor concerns over Meta's spending direction, compounded by higher stock-based compensation.
XTB research director Kathleen Brooks said investors are still waiting for clearer signs that Meta's AI investments are paying off.
“It’s been a rough couple of weeks for Meta’s share price, which has traded lower for ten consecutive days, its longest losing streak in its history,” Brooks said.
“Although severance costs are only temporary and we could see profitability bounce back in Q3, we think that the sharp selloff in the Meta share price in the post-market is down to the astonishing burn rate of free cash flow.”
