Meta Platforms shares fell about 3% in premarket trading on Thursday as investors weighed AI growth against rising costs. Despite strong revenue, the company faces a $25 billion data-privacy penalty. Meta expects annual capital expenditure up to $145 billion, while many brokerages raised price targets after the latest earnings report.
Synopsis
Shares of Meta Platforms declined in premarket trading as investors evaluated costs against growth in the AI sector and faced legal hurdles. Despite reporting higher-than-expected quarterly revenue, the company is under pressure from a $25 billion data-privacy ruling. Meta's aggressive investment in AI includes a forecasted annual capital expenditure of up to $145 billion. A significant free cash flow deficit also reflects the costs incurred in its expansion strategy.
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Shares of Meta Platforms fell about 3% in premarket trading on Thursday, as investors weighed the benefits of the company's fast-growing AI agent business against the mounting costs of funding its ambitious AI expansion.
The stock has gained more than 5% this year and, if current losses hold, is set to erase about $50 billion from the company's market value.
The downbeat reaction comes despite Meta reporting stronger-than-expected quarterly revenue, forecasting fourth-quarter sales above Wall Street estimates and highlighting rapid adoption of its new AI agent app, Muse
The earnings report came hours after a New Mexico judge ordered the company to pay a $25 billion penalty in a data-privacy case linked to Cambridge Analytica. Meta said it plans to appeal the ruling
The Instagram parent is spending heavily to support its AI plans, with an expected annual capital expenditure forecast between $135 billion and $145 billion. It also reported a free cash flow deficit of $2.12 billion in the third quarter, compared with positive free cash flow a year earlier
Deutsche Bank analyst Benjamin Black said Meta's AI investments were generating stronger advertising performance and engagement, creating a "positive thesis creep" around the stock as investors increasingly view computing infrastructure as a revenue-generating asset rather than a cost burden
Meta also announced plans to create a new class of non-voting Class C shares, giving the company additional flexibility for acquisitions and employee compensation while preserving CEO Mark Zuckerberg's voting control
At least 13 brokerages have raised their price targets on the stock after the results, according to data compiled by LSEG
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