Meta lifted the low end of its 2026 capital-spending forecast on Wednesday, Oct. 21, raising it to $135 billion from $130 billion. The company now expects to spend between $135 billion and $145 billion this year—a huge sum by any measure. Analysts had penciled in roughly $139.79 billion, leaving Meta’s new range close to what Wall Street already expected.
The bill is coming due quickly. Third-quarter capital expenditures reached $34.91 billion, up from $31.08 billion in the second quarter. Meta is pouring money into data centers, advanced chips and computing power as it competes directly with OpenAI and Anthropic. Earlier this month, Chief Executive Mark Zuckerberg told the "Cheeky Pint" podcast he'd been willing to bet up to $200 billion on AI before knowing whether the models would work.
Cash Flow and Debt
The spending is squeezing Meta’s balance sheet. Free cash flow fell to negative $2.12 billion in the third quarter, a sharp reversal from positive $10.63 billion a year earlier. The New York Times reported negative $2 billion for the three months ended Sept. 30, down from $784 million at the end of June and $8.55 billion in June 2025.
Long-term debt tells a similar story. Meta carried $80.9 billion in long-term debt last quarter, compared with $58.7 billion a year earlier. The company has also turned to financing that doesn’t appear on its balance sheet, including a $50 billion Louisiana data-center deal backed by private-credit firms. Anyone who values transparency in corporate accounts should take a closer look at off-balance-sheet arrangements like this.
Meta said it will issue a new class of non-voting Class C common stock in January 2027, amounting to a two-for-one split. The company says the shares will give it more options to raise money, fund acquisitions and retain talent while preserving Zuckerberg’s control. The New York Times reported the stock could also go toward employee pay. A split lowers the price per share and increases the number available to trade, but shareholders still own the same proportion of the company.
Earnings and the Settlement
Revenue was strong. Third-quarter revenue reached $64.60 billion, up 26% from a year earlier and above the $63.37 billion Wall Street expected, according to LSEG data. Meta forecast fourth-quarter revenue of $73 billion to $76 billion, slightly above analysts’ $73.73 billion estimate.
Costs climbed sharply. Expenses totaled $51.61 billion, up 68% from a year earlier. Profit reached $9.8 billion, compared with $2.7 billion a year ago, though a tax charge weighed on that earlier period. Diluted earnings per share came to $3.83. The company said the figure would have been $7.40 without a $9.89 billion charge tied to a child-safety settlement. The Verge reported operating income would have reached $22.89 billion without the charge.
Meta agreed in August to resolve claims from nearly all U.S. states that its platforms were designed to addict children. The Verge put the total at $17.1 billion, with $5.3 billion contingent on YouTube and TikTok adopting stricter settings and safeguards for minors. Reuters described a deal worth up to $18 billion over a decade, with restrictions on teenagers’ use of Facebook and Instagram. The agreement spared Meta a lengthy trial that could have exposed more internal documents.
Legal Pressure
A New Mexico judge ordered Meta to pay $25 billion on Wednesday after a jury found the company misled state residents about sharing user data with third parties and enforcing policies on hate speech and misinformation. The case traces back to British political consulting firm Cambridge Analytica. Emarketer senior analyst Minda Smiley called the penalty a "stark reminder of the current legal challenges Meta faces, which will continue into next year." She added: "Questions and concerns related to privacy and safety will only ramp up should AI agents become more mainstream, which could ultimately hurt Meta considering its reputation in this area."
The Product Bet
Meta’s consumer AI agent, Muse, has attracted millions of users. Business Insider reported more than 2 million daily users and 3 million downloads. The New York Times called it the fastest-growing AI app since OpenAI’s ChatGPT launched in 2022. At Meta’s Connect keynote in September, Zuckerberg said Muse "has a novel business model." He explained: "We believe that Muse will make you money, and we're standing behind this by making Muse free for a huge number of tokens with the expectation that over time, we will profit by taking a small fee from transactions." Some enterprises have restricted Muse’s access over security concerns.
Investors welcomed the results. Meta shares rose more than 4% in extended trading, Reuters reported. Business Insider reported a 4.12% after-hours gain at publication. The upbeat reaction followed sharp losses in recent quarters: the stock fell almost 10% after earnings per share missed estimates and dropped 6% the quarter before on higher capital-spending guidance.
Zuckerberg summed up the results plainly. "Our investments are paying off, the core business is strong, and we're seeing velocity across the board," he said. Chief Financial Officer Susan Li struck a more measured note. "We are still developing our budget and capacity plans for next year, but we expect to continue investing aggressively to support both our core business and emerging A.I. initiatives," she said.
The Wider AI Race
Meta isn’t the only company spending heavily. Market commentary described investors as uneasy about debt issued by major AI companies and strain in funding structures at CoreWeave and other riskier corners of the boom. Gartner forecasts worldwide information-technology spending will rise 15% next year, reaching $7.3 trillion in 2027 from a projected $6.39 trillion this year. Spending on data-center systems is expected to grow 55%. John-David Lovelock, distinguished VP analyst at Gartner, told the WSJ Leadership Institute: "We have the demand for AI-optimized servers going crazy. We have the supply not being able to keep up. We have AI servers doubling in price, and nobody's slowing down on orders."
Rivals are moving quickly. Anthropic introduced Claude Duet on Wednesday, a work-focused AI agent still in early testing. It joins OpenAI’s dots, Meta’s Muse, Google’s Gemini Spark and agents from start-up Instinct, which raised $1 billion in its latest round. Anthropic said Duet is less suited to personal errands than rival agents. Users must approve each purchase; even with approval, stock trading and transfers between accounts remain blocked. The agent is available by wait-list to Pro and Max subscribers in the United States at no additional charge.
Why This Matters: Meta is spending more than it earns on the margin of its AI bet, while free cash flow keeps moving in the wrong direction. Long-term debt has climbed to $80.9 billion, and off-balance-sheet financing adds obligations missing from the main ledger. A $9.89 billion settlement charge and a $25 billion New Mexico penalty show the cost of regulatory and legal exposure, expenses shareholders bear regardless of how the AI wager turns out. Zuckerberg has tied his company’s future to an unproven business model while preserving control through non-voting shares. Investors, lenders and competitors will judge whether that concentration of risk pays off. For those who believe markets should discipline capital allocation, the test is whether Meta’s returns justify the debt it’s taking on today.
- meta
- artificial intelligence
- capital spending
- data centers
- mark zuckerberg
- stock split
- ai financing
- muse