Meta's Q3 AI capital expenditure rises to $34.91 billion, free cash flow turns negative
Meta's third-quarter revenue was $64.6 billion, up 26% year-over-year, but capital expenditure reached $34.91 billion, exceeding operating cash flow of $32.79 billion, resulting in negative free cash flow of $2.12 billion. The company raised its annual capital expenditure floor from $130 billion to $135 billion and its ceiling to $145 billion, and its stock fell more than 7% after the earnings call. In addition, a one-time expense of $9.89 billion, including a settlement over a teen mental health lawsuit, reduced quarterly operating profit by 37% to $13 billion.
Why read this
AI score 71
Meta's Q3 capital expenditure exceeded operating cash flow, turning free cash flow negative, illustrating the pressure of observable AI infrastructure investment on its financial structure.
Topics
Body · AI translation
Meta’s capital expenditure trend, with CAPEX accounting for 54% of revenue in the third quarter of 2026. (Data: Meta; Graphic: Prompt & Power)
PC본문_6월 Mouser (in Article)//
AD Manager | AD178089411676 //
// AD Manager | AD178089411676
Meta shares plunged despite strong third-quarter earnings as massive capital investment in artificial intelligence (AI) raised concerns about mounting financial pressure.
Meta shares fell more than 7% on Oct. 22 local time. Despite revenue growth that exceeded market expectations, concerns about deteriorating cash flow from large-scale AI infrastructure expansion weighed on the stock.
Meta shares closed approximately 0.47% higher in regular trading on the day of its earnings announcement, supported by expectations of strong results. Its fourth-quarter revenue guidance of $73 billion to $76 billion also exceeded forecasts, initially sending shares up more than 3% to 4% in after-hours trading and above $717. However, the stock reversed course sharply during the earnings conference call as continued heavy investment in AI infrastructure and the resulting cash flow pressures came into focus.
Meta reported record third-quarter revenue of $64.6 billion, up 26% from a year earlier. Strong performance in its core digital advertising business helped revenue comfortably exceed the market forecast of $63.37 billion. Advertising impressions increased 10%, while the average price per ad rose 14%.
However, rapidly rising capital expenditure (CAPEX) weighed on the results. Meta’s third-quarter capital spending reached $34.91 billion, exceeding the $32.79 billion in cash generated from operating activities and resulting in negative free cash flow (FCF) of $2.12 billion. This meant the company spent more on AI data centers and infrastructure than it generated in operating cash.
Management’s commitment to further investment added to market concerns. Meta raised the lower end of its annual capital expenditure forecast from $130 billion to $135 billion and increased the upper end to $145 billion.
Meanwhile, one-time expenses of $9.89 billion, including settlements related to lawsuits involving teenage mental health, contributed to a 37% decline in quarterly operating profit to $13 billion. Excluding legal expenses, Meta’s third-quarter operating profit increased 11%.
The premium on five-year credit default swaps (CDS) insuring Meta’s debt against default surged to a record 114.79 basis points. The increase reflected changing perceptions of Meta’s financial position on Wall Street and in credit markets. Bloomberg reported that investors were concerned about rising financing costs associated with large-scale borrowing.
Reuters also reported that Meta’s plan to introduce nonvoting Class C shares to finance AI investment had heightened investor concerns. Meta plans to distribute one Class C share for each existing Class A or Class B share and subsequently use the new shares to raise capital. The market views the move as an attempt to secure external funding while preserving CEO Mark Zuckerberg’s control over the company.