Meta Platforms CEO Mark Zuckerberg doesn’t have his head within the clouds—and that is likely to be the issue.
Shares within the Fb guardian are getting crushed Thursday after it unveiled a blended set of third-quarter earnings final night time and doubled down on plans to billions extra on synthetic intelligence over the approaching 12 months.
“Our compute wants have continued to broaden meaningfully,” finance chief Susan Li instructed traders late Wednesday. “We anticipate to speculate aggressively to satisfy these wants each by constructing our personal infrastructure and contracting with third-party cloud suppliers. Because of this, our present expectation is that Capex greenback progress shall be notably bigger in 2026 than 2025.”
These remarks overshadowed each a report quarterly income tally of $51.2 billion and a $16 billion tax hit that ate into the group’s backside line.
“Meta has at all times been an organization keen to spend its approach into the longer term,” stated Jacob Falkencrone, world head of funding technique at Saxo Financial institution. “This quarter confirms that sample, solely now the guess is much bigger and the payoff much less instant.”
Meta’s problem, nonetheless, is that it might’t finance its AI ambitions by way of money flows in the best way that rivals similar to Google, Amazon and Microsoft, which have large business cloud computing divisions that generate billions in income, are in a position to do.
And that results in extra debt.
Bloomberg reported Thursday that Meta is planning to lift $25 billion by way of a six-part company bond providing that can embody debt that doesn’t mature till the 12 months 2065.
A deal Meta completed final week, aimed toward constructing a brand new information heart in Louisiana, additionally moved $27 billion in debt from its steadiness sheet by structuring it by way of a special-purpose car.
Zuckerberg hinted on the thought of promoting a few of its extra computing energy to outdoors clients if the group “overshoots” on its spending and infrastructure plans.
“After which you already know, the type of the very worst case can be that we successfully have simply prebuilt for a few years, wherein case, after all, there can be some loss and depreciation,” he stated. “However we’d develop into that and use it over time.”
Quite a bit can change in that ready interval, nonetheless, particularly provided that Meta stays caught within the inherent contradiction of AI itself: If the know-how is profitable in dashing up duties and accelerating on-line efficiencies, customers will doubtless then spend much less time on the ad-based platforms similar to Fb and Instagram that drive almost the entire group’s earnings.
It’s additionally price noting that the Metaverse, Zuckerberg’s final nice tech imaginative and prescient that was launched with nice fanfare in late 2020, has been one thing of a dud.
Actuality Labs, the division created to energy that different universe, misplaced $4.4 billion final quarter, taking its cumulative crimson ink previous $70 billion in lower than 5 years.
Financial institution of America analyst Justin Put up, nonetheless, stays a believer. “We anticipate Meta inventory to be controversial given a restricted EPS progress outlook and free money circulate strain in 2026,” he stated in a notice revealed Thursday. “Nevertheless, we see Meta ready of energy with large consumer community and alternative to integration compelling AI merchandise (together with content material creation instruments) over the subsequent two years.”
Nonetheless, Put up lowered his Meta inventory value goal by $90, taking it to $810 a share, though he saved his Purchase ranking in place.
Meta inventory was down 9.6% at 679.73, a transfer that may mark the most important single-day since April 2024.
