October 22, 2026 — Shares of Meta Platforms fell more than 5% in early trading on Thursday as investors weighed the growth potential of its artificial intelligence business against the rising costs of expanding its AI infrastructure.
The decline came despite the company’s stronger-than-expected quarterly revenue, an upbeat fourth-quarter sales forecast and growing adoption of its AI agent app, Muse. If the losses persist, Meta could lose approximately $85 billion in market value.
The market reaction highlights a growing challenge for the social media giant: convincing investors that its substantial AI investments will translate into sustainable financial returns.
Muse AI Growth Fails to Calm Spending Concerns
Meta has highlighted rapid adoption of Muse, its AI agent designed to perform tasks across applications, including sending emails and making payments.
The company’s AI investments are also showing benefits in its advertising business and user engagement. Deutsche Bank analyst Benjamin Black said these improvements were strengthening the investment case for Meta, as investors increasingly view computing infrastructure as an asset capable of generating revenue rather than simply an expense.
However, concerns about the scale and timing of AI spending continue to weigh on sentiment.
Meta expects annual capital expenditure of between $135 billion and $145 billion as it expands its AI capabilities and computing infrastructure. The company also reported a third-quarter free cash flow deficit of $2.12 billion, compared with positive free cash flow a year earlier.
These figures have intensified scrutiny of how quickly the company’s AI investments can generate returns sufficient to justify their costs.
$25 Billion Privacy Penalty Adds Pressure
Meta’s earnings report arrived just hours after a New Mexico judge ordered the company to pay $25 billion in a data-privacy case linked to the Cambridge Analytica scandal.
The case centered on allegations that Meta misled consumers about its handling of personal data and other platform practices. The company has said it intends to appeal the ruling.
The legal setback adds another source of uncertainty for investors already assessing Meta’s spending plans and cash flow.
Together, the potential financial consequences of the judgment and the company’s substantial AI investment requirements have contributed to concerns about its future financial flexibility.
New Share Class Could Support Expansion
Meta also announced plans to create a new class of non-voting Class C shares. The structure would give the company greater flexibility in financing acquisitions and compensating employees while preserving Chief Executive Mark Zuckerberg’s voting control.
The move comes as the company seeks to support its long-term expansion without losing strategic control.
At least 13 brokerages have raised their price targets for Meta following its results, according to LSEG data. The increases suggest that some analysts remain optimistic about the company’s revenue growth and AI opportunities despite the negative share-price reaction.
Credit Markets Signal Growing Investor Caution
Concerns about Meta’s spending plans have also spread into credit markets. The cost of insuring the company’s debt against default rose to a record high following the earnings report, indicating increased concern about its credit risk.
While this does not necessarily mean investors expect Meta to default, it reflects greater caution about the financial risks associated with its expansion.
Meta’s ability to sustain its AI investment program while maintaining healthy cash flow and investor confidence will be central to its outlook.
For now, the company’s results present a mixed picture: its AI products and advertising business offer significant growth opportunities, but the costs of pursuing those opportunities—and the legal and financial risks surrounding them—are becoming increasingly difficult for investors to overlook.
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