Meta Platforms ( META ) The stock price fell by nearly 6% on Thursday, October 22, despite the company reporting third-quarter revenue of $64.6 billion. Investors' concerns focus on the decline in operating profitability and the rising costs associated with Mark Zuckerberg's expansion into artificial intelligence.
Meta Revenue increased by 26%, but operating profit declined by 37%
According to the official financial report of Meta, revenue in the third quarter increased by 26% year-on-year to $64.6 billion, exceeding Wall Street's forecast of around $63.3 billion.
However, operating profit decreased by 37% to $12.99 billion, and the operating margin narrowed from 40% to 20%.
Excluding related expenses, the operating profit for the quarter could have reached approximately $22.88 billion, which is higher than the same period last year.
These data indicate that the market's reaction to this financial report is not simply due to declining profits. Reports point out that the disclosed weak performance is largely due to litigation costs, but investors are also concerned about the company's potential expenditure path.
Meta $145 billion AI The expenditure plan puts pressure on cash flow
Meta The capital expenditure in the third quarter was $34.91 billion, which includes payments for the principal of financial leases.
Its free cash flow dropped to negative $2.12 billion, compared to positive $1.063 billion in the same period last year.
This deterioration has exacerbated market concerns regarding Meta's $145 billion investment plan. The plan includes data centers, AI chips, servers, and other infrastructure.
Meta also raised the lower limit of its capital expenditure guidance for 2026 from $130 billion to $135 billion, while maintaining the upper limit of $145 billion unchanged.
The widening gap between revenue growth and available cash once again highlights a broader issue: whether AI expenditures are yielding returns.
Amazon has also expressed similar concerns. Reports indicate that despite the accelerated growth in demand, the expansion of its cloud infrastructure continues to put pressure on its cash generation capabilities.
Can the growth of AI under Meta reverse the downward trend of stock prices?
However, the company has not yet demonstrated that the growing adoption rate of Muse can generate profits sufficient to cover its computational costs.
Zuckerberg has admitted that some of the newer AI products have not yet achieved profitability, however, Meta expects that efficiency improvements and future commercial services will enhance the economic viability of these products.
Meta expects revenue in the fourth quarter to be between $73 billion and $76 billion, indicating that management anticipates that the growth momentum will continue to be strong.
The author, Maya Bennett, is a financial journalist whose reporting covers cryptocurrency, stocks, and broader market trends. Her work focuses on Bitcoin, major digital assets, the stock market, monetary policy, and economic developments that influence investor sentiment.
