Meta’s advertising metrics strengthened in the third quarter, yet its shares slumped nearly 7% on Thursday after capital spending exceeded cash from operations and free cash flow turned negative. Ad impressions rose 10%, while the average price per ad rose 14%.
The company reported free cash flow of negative $2.12 billion, a reversal from positive $784 million in the prior quarter. Capital spending reached $34.91 billion, compared with $32.79 billion in cash from operations.
Meta also lifted the bottom of its full-year capital expenditure forecast to $135 billion from $130 billion. Its new range is $135 billion to $145 billion.
The market reaction spread well beyond Meta. The Nasdaq Composite fell 2.6% on Thursday, its steepest decline since 5 June, when it declined 4.2%. The S&P 500 slid 1.21%, its biggest drop since 29 July, when it declined 1.52%.
Tesla and Alphabet each fell 3.1%, while Microsoft declined 2.2%. Intel and Advanced Micro Devices each fell about 8%, and Broadcom slid 4.3%.
The weakness continued into Friday’s Asian trading. Japan’s Nikkei 225 fell more than 2% in morning trading, while South Korea’s KOSPI dropped as much as 3.5%.
The Nasdaq is about 5.8% below the all-time high it reached on 6 October.
Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, said: 'There are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason.'
Meta’s earnings gave investors competing signals. Its GAAP earnings per share of $3.83 missed analyst expectations of $5.46 by roughly 30%, largely because of a $9.89 billion litigation charge.
The charge was tied to a litigation settlement with 52 state attorneys general over teen mental health and social media.
On an adjusted basis, Meta earned $7.40 per share, beating adjusted analyst expectations by approximately 60 cents.
Its daily active people reached 3.64 billion, up 3%. Meta forecast fourth-quarter revenue of $73 billion–$76 billion, with a $74.5 billion midpoint.
Meta’s spending plans come as global AI investment is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to Gartner.
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