Meta Stock Falls Over 10% After Earnings as AI Spending Outlook Hits Sentiment

Meta Platforms shares have fallen sharply after the company reported stronger-than-expected first-quarter earnings but raised its 2026 capital spending forecast, renewing investor concerns over the cost of its artificial intelligence expansion. Meta stock dropped more than 10% in early trading on Thursday, putting the company on track for its biggest one-day decline since October 2025 to trade at $609 at press time. The move erased about $160 billion to $170 billion in market value, even as the company reported revenue and earnings above Wall Street expectations. However, despite the decline, Jim Cramer has urged investors not to abandon Meta after the post-earnings selloff, saying he still has confidence in Mark Zuckerberg’s AI strategy and views the spending increase as part of Meta’s long-term growth plan. The company posted first-quarter revenue of $56.3 billion, above the $55.5 billion consensus estimate. Earnings per share came in at $10.44, compared with expectations of about $8.15. Excluding an $8 billion one-time tax benefit, adjusted earnings were closer to $7.31 per share. AI Capex Forecast Drives Selloff The selloff centered on Meta’s updated capital expenditure outlook. The company now expects 2026 capital spending between $125 billion and $145 billion, up from its earlier range of $115 billion to $135 billion. Meta, which plans to cut jobs as we reported, cited higher component costs and added data center expenses as the main reasons for the increase. The company is investing heavily in AI infrastructure, including chips, servers, data centers, and model development. Investors have become more cautious toward large AI spending plans across Big Tech. Alphabet, Microsoft, Amazon, and Meta are expected to spend more than $650 billion combined this year on AI-related infrastructure. Meta’s higher capex forecast raised questions over how quickly the company can convert that spending into measurable returns. Analysts have noted that Alphabet and Microsoft showed clearer near-term revenue gains from cloud and AI services, while Meta’s AI investments remain more closely tied to advertising optimization, content ranking, and longer-term product development. Despite the market reaction, Meta’s operating business continued to show strength. Full-year expenses are still expected to remain within a range of $162 billion to $169 billion. Advertising and User Metrics Remain Strong Meta’s core advertising business delivered strong growth in the quarter. Ad impressions across its apps rose 19% year over year, while the average price per ad increased 12%. That combination is closely watched because higher impressions and higher pricing rarely accelerate together. The gains suggest that demand for Meta’s ad inventory remained strong while engagement across its platforms continued to support pricing. Daily active people across Meta’s apps reached 3.56 billion in March, up 4% from a year earlier. The figure was slightly below the 3.58 billion reported in the previous quarter, with Meta pointing to internet disruptions in Iran and WhatsApp restrictions in Russia. Reels engagement also improved, with time spent rising 10% after Instagram ranking changes. Facebook video time increased more than 8%, marking the largest sequential gain in four years. Meta also reported growth in WhatsApp monetization. Revenue from Family of Apps “Other” rose 74% year over year, supported by business messaging and related services. Regulation and Technical Levels Add Pressure Meta is also facing regulatory scrutiny in Europe. The European Commission has found the company in preliminary breach of the Digital Services Act over alleged failures to prevent underage users from accessing Facebook and Instagram. Regulators said minors can bypass age restrictions by entering false birth dates and that reporting underage accounts is too difficult. If the findings are confirmed, Meta could face fines of up to 6% of its global annual turnover. The stock is also under technical pressure. According to market analyst Ali Charts, the META stock price is trading in a volatile range after repeated sharp pullbacks. The latest drop pushed shares toward the $600 area after a rejection near the $650 to $720 resistance zone. Source: X The $600 level is now a near-term support area, followed by $565 and then the prior low near $520. On the upside, a move back above $650 would be needed to weaken the immediate bearish setup and reopen a path toward $700 to $720. However, despite the price trend, analyst views remain divided. JPMorgan has downgraded Meta to Neutral from Overweight and cut its price target to $725 from $825. Evercore ISI, however, raised its target to $930 from $900 while maintaining an Outperform rating, citing Meta’s ability to use AI to improve consumer and advertiser products.