Key Takeaways:
Meta Platforms (NASDAQ:META) has fallen more than 10% in the past month as investors react to a significant increase in its spending plans for artificial intelligence.
"Wells Fargo continues to back Meta Platforms as a beneficiary of improving market confidence in companies monetizing compute investments," analyst Ken Gawrelski said, while trimming the firm's price target to $765 from $770.
The stock's slide contrasts with a strong first-quarter earnings report, where Meta posted revenue of $56.31 billion, a 33% year-over-year increase, and earnings per share of $10.44 that crushed consensus estimates. Ad impressions rose 19% and the average price per ad grew 12%, according to company filings. The core issue for the market is the company’s revised full-year 2026 capital expenditure guidance, which was raised to a range of $125 billion to $145 billion to fund its AI ambitions.
The heavy spending is designed to secure Meta's position in the generative AI race against competitors like Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), who are also developing their own silicon. The investment comes at a cost, fueling investor concern about near-term profitability and contributing to the stock's recent underperformance.
The capex increase is part of a broader, aggressive pivot to AI that has included significant organizational restructuring. Meta recently eliminated roughly 10% of its global workforce and shifted thousands of other employees into AI-focused teams. In an internal memo, CEO Mark Zuckerberg framed the moves as necessary to match the company's hefty spending on compute and AI infrastructure.
While the Family of Apps segment remains highly profitable, the company's Reality Labs division continues to be a drag on earnings, posting a $4.03 billion operating loss in the first quarter of 2026. The division has lost over $23 billion since the beginning of 2025, a figure that weighs on investor sentiment as the company doubles down on another capital-intensive technology.
The selloff has pushed Meta's stock 11.23% below its price from a month ago, testing investor patience. The company's next earnings report will be a critical catalyst for demonstrating if the massive AI investments are beginning to translate into revenue and profit growth.
This article is for informational purposes only and does not constitute investment advice.
