Meta Platforms (META) is navigating turbulent waters as its stock faces uncertainty following a 6% drop in after-hours trading after the release of its Q1 earnings report. While the company reported impressive figures, including an earnings per share (EPS) of $10.44 on revenue of $56.3 billion, the market reacted negatively due to rising concerns about future capital expenditures and AI spending.
A year ago, Meta’s 2025 spending forecasts projected total expenditures between $113 billion and $118 billion. However, that context matters because Meta has now increased its 2026 capital expenditures forecast to a staggering range of $125 billion to $145 billion. This shift highlights the company’s commitment to investing heavily in artificial intelligence, which many analysts believe could drive future growth but also raises questions about profit margins.
Wall Street analysts had anticipated adjusted earnings of $8.15 per share on revenue of $55.5 billion, making Meta’s actual performance seem even more impressive at first glance. Yet, excluding an $8 billion one-time tax benefit, the adjusted EPS would have been only $7.31. Such figures underline the volatility surrounding Meta’s stock performance, which has fluctuated by more than 10% following earnings in three of the last four quarters.
Despite these challenges, Meta announced a 4% increase in daily active users to 3.56 billion as of March, suggesting that user engagement remains robust. However, the company plans to counterbalance its investments by cutting approximately 8,000 jobs—about 10% of its workforce. This decision reflects an effort to streamline operations amid rising compute costs associated with AI development.
Oppenheimer analysts noted that while Meta is likely to report strong revenue growth, they caution that higher compute costs for AI models could offset these gains. They stated that “Meta is likely to report strong revenue growth, but said that the company faces limited profit upside as higher compute costs for Meta’s AI models could offset the revenue gains.” Such sentiments contribute to the mixed feelings among investors.
Interestingly, all 20 analysts tracked by Visible Alpha rate Meta stock as a “buy,” with an average price target of $865. This optimistic outlook contrasts sharply with current market volatility and raises questions about how investors will respond in light of increased spending forecasts and job cuts.
The next few months will be telling for Meta Platforms as it navigates these challenges while aiming for continued growth in both user engagement and revenue generation. Analysts will be closely watching how these strategic decisions impact not only financial performance but also investor sentiment moving forward.