Meta’s AI Spending Raises Debt and Control Questions

Meta raised its 2026 capital-spending forecast to as much as $145 billion on Wednesday, while free cash flow turned negative and long-term debt climbed to $80.9 billion. The company is directing that money toward data centers, advanced chips and computing power as it competes with OpenAI and Anthropic.

Meta lifted the lower end of its forecast to $135 billion from $130 billion. Analysts had expected annual spending of $139.79 billion. Third-quarter capital expenditures reached $34.91 billion, up from $31.08 billion in the second quarter.

Spending and Financing

Meta’s free cash flow fell to negative $2.12 billion in the third quarter, compared with positive $10.63 billion a year earlier. The New York Times reported the figure as 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 totaled $80.9 billion last quarter, up from $58.7 billion a year earlier. Meta has also used financing arrangements that don’t appear on its balance sheet, including a $50 billion Louisiana data-center deal financed by private-credit firms.

On the “Cheeky Pint” podcast earlier in October, CEO Mark Zuckerberg said he’d been willing to bet up to $200 billion on AI before he knew the models would work. “Our investments are paying off, the core business is strong, and we’re seeing velocity across the board,” Meta CEO Zuckerberg said in a statement.

Meta chief financial officer Susan Li said the company was still developing next year’s budget and capacity plans. “We expect to continue investing aggressively to support both our core business and emerging A.I. initiatives,” Li said.

The company said it would issue a new class of non-voting Class C common stock in January 2027, effectively creating a two-for-one stock split. Meta said the shares would give it more ways to raise financing, fund acquisitions and retain talent while maintaining Zuckerberg’s control. The New York Times also reported the shares could be used for employee compensation. The split would divide individual shares, lowering the share price and increasing the number available to buy and sell.

Revenue, Legal Costs and User Data

Meta reported third-quarter revenue of $64.60 billion, up 26% from a year earlier and above Wall Street estimates of $63.37 billion, according to LSEG data. It forecast fourth-quarter revenue of $73 billion to $76 billion, above estimates of $73.73 billion.

Costs and expenses reached $51.61 billion, up 68% from a year earlier. Profit was $9.8 billion, compared with $2.7 billion a year earlier, when a tax charge affected results. Meta reported diluted earnings per share of $3.83; without a $9.89 billion charge tied to a child-safety settlement, it would have been $7.40. The Verge reported operating income would have been $22.89 billion without the settlement charge.

In August, Meta agreed to pay to settle claims by nearly all U.S. states that its platforms were designed to addict children. The Verge reported the settlement amount as $17.1 billion, with Meta paying $5.3 billion of that amount if YouTube and TikTok implement stricter settings and safeguards for children, which Meta also agreed to. Reuters described the deal as as much as $18 billion over a decade and said it included restrictions on teenagers’ use of Facebook and Instagram. The agreement removed a regulatory hurdle and allowed Meta to avoid a potentially lengthy trial that could have exposed more internal documents about its treatment of young users.

A New Mexico judge ordered Meta to pay $25 billion on Wednesday after a jury found it misled state residents about sharing user data with third parties and enforcing policies on hate speech and misinformation. The case related 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 said privacy and safety concerns “will only ramp up should AI agents become more mainstream,” potentially hurting Meta given its reputation in that area.

AI Agents and Market Pressure

Meta’s consumer-focused AI agent Muse had more than 2 million daily users and 3 million downloads, according to Business Insider. The New York Times reported it became the fastest-growing AI app since OpenAI’s ChatGPT in 2022. Some users told Business Insider they used Muse to plan trips and prepare for exams. Some enterprises have restricted Muse’s access over security concerns.

At Meta’s Connect keynote in September, Zuckerberg said Muse “has a novel business model.” Meta expects to make money by taking “a small fee from transactions” after offering the service free for a large number of tokens, he said. Users must approve purchases made through Anthropic’s Claude Duet, another AI agent introduced Wednesday; Anthropic said the tool can connect to more than 6,000 outside apps and that stock trading and transfers between accounts are blocked even with approval.

Investors have grown anxious about debt issued by major AI companies and signs of strain in funding structures at CoreWeave and other riskier parts of the AI boom. Gartner forecast worldwide information-technology spending would rise 15% next year to $7.3 trillion in 2027, from a forecast $6.39 trillion this year. Data-center systems spending is expected to grow 55%, while infrastructure as a service is forecast to grow 26% to $367 billion. “We have the demand for AI-optimized servers going crazy. We have the supply not being able to keep up,” Gartner distinguished VP analyst John-David Lovelock told the WSJ Leadership Institute.

Meta’s shares rose more than 4% in extended trading, according to Reuters. Investors had reacted negatively to earlier spending forecasts: the stock fell almost 10% last quarter after earnings per share missed estimates and fell 6% the quarter before after higher capital-spending guidance.