New Delhi: Shares of Meta Platforms fell sharply in extended trading after the company unveiled a massive increase in spending on artificial intelligence infrastructure. The parent company of Facebook and Instagram estimated that it will spend between $125 billion and $145 billion on capital expenditures in 2026, up from its previous guidance. The news caused a measured response from investors, resulting in a decline of over 6% for the stock, despite the company’s strong revenue growth.
The announcement comes at a time when Meta is also facing mounting scrutiny over the impact of its platforms on young users. The company noted that regulatory and legal issues in the US and EU could have significant impacts on its operations. It revealed that it is facing civil litigation and trials relating to claims that its platforms are addictive and harmful to children, further fuelling concern among investors.
Heavy AI spending raises investor questions
Meta’s AI spending is part of CEO Mark Zuckerberg’s efforts to refashion the company for the future, using automation and advanced technologies. Meta is spending big to build the infrastructure to run AI models and agents to automate employee work.
However, analysts say the scale of spending in unsettled markets is Matt Britzman from Hargreaves Lansdown said that although the increased expenses could be partly related to the rising cost of hardware and memory, there is concern from investors about the absence of short-term returns. Reuters also reported that Meta has started to restructure, including layoffs and consolidation of teams.
Legal battles and youth backlash intensify
Meta is facing numerous lawsuits from individuals, schools and governments. These suits allege the company has created products harmful to children’s well-being. Several major cases are on the docket for the next few months, including in New Mexico and California, which may have far-reaching implications.
The company cited growing global bans on teenagers using social media. This, along with regulatory pressures in major markets, could affect growth. Meta said in its earnings report that continued focus on safety for children is a risk.
Mixed performance despite strong revenue
Meta’s revenue for the first quarter was $56.31 billion, exceeding the expectations of $55.45 billion as reported by LSEG. It also forecast revenue for the second quarter of $58 billion to $61 billion, which is close to analyst predictions.
However, the news didn’t impress investors, particularly compared to positive earnings reports from competitors such as Alphabet. The company delivered expected results, but they were not as strong as others in the tech industry, said DA Davidson analyst Gil Luria. There are also concerns about increasing costs without commensurate reductions in expenses.
Workforce changes signal AI-driven shift
Meta is still making workforce changes as it transitions to AI. Earlier this year, the company announced job cuts and expects to make more in the second half. Susan Li, Meta’s chief financial officer, stated the company is in the process of figuring out the “right size” of its workforce as new AI technologies emerge.
Reuters also reported that Meta is experimenting with new tracking software for employees to better train AI models. Zuckerberg noted that fewer, AI-supported employees can now do the work of many more, which means a major change in the company’s approach.
Despite layoffs, Meta’s global daily active users increased 4% year-on-year to 3.56 billion, though it did report its first-ever quarterly decline in Daily Active People, largely due to regional issues and platform bans.