Meta Platforms experienced a sharp stock decline on Thursday following the release of third-quarter earnings results that highlighted growing concerns about the company’s capital-intensive artificial intelligence strategy. Share prices dropped nearly 7% in response to the financial disclosures and forward guidance.
The company reported negative free cash flow of $2.12 billion during the third quarter, a significant metric that caught investor attention. Additionally, Meta raised the lower bound of its full-year capital expenditure range to $135 billion from the previously stated $130 billion floor, with the upper limit set at $145 billion. This increase underscores the magnitude of the company’s planned investment in AI infrastructure and development.
Market stress signals emerged beyond the stock price movement. Credit default swaps on Meta’s five-year debt reached all-time highs on Thursday, indicating that investors were pricing in elevated credit risk concerns as the company pursues its ambitious artificial intelligence spending agenda.
Meanwhile, Meta’s revenue performance demonstrated strength, with third-quarter sales reaching $64.60 billion, up 26% year-over-year and exceeding analyst expectations of $63.37 billion. Reported earnings per share came in at $3.83, though comparability with Wall Street’s forecast of $5.75 per share remained unclear based on available information.
During Wednesday’s earnings release, Meta announced plans to create a new class of nonvoting Class C common stock, which the company stated was designed to preserve the founder-led organizational structure and facilitate financing for growth initiatives. An SEC filing revealed that CEO Mark Zuckerberg had been considering leaving California due to potential liability from the proposed “California Wealth Tax,” but the new stock structure was noted as having convinced him to remain in the state.
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