Meta shares drop on $145B capex despite 57% Q1 EPS beat
Meta Platforms reported a massive first-quarter earnings beat, but shares fell sharply as investors focused on a staggering $145 billion capital expenditure guidance that raises fresh doubts about return on investment.
Meta Platforms shares dropped 8.55% in the aftermath of a first-quarter earnings report that comfortably beat expectations. Revenue reached $56.31 billion, up 33% year over year, while earnings per share of $10.44 crushed consensus estimates by 57% for the fifth consecutive quarter. The selloff came as the company raised its 2026 capital expenditure guidance to a range of $125 billion to $145 billion, a dramatic increase from $72.22 billion in the prior year.
The underlying advertising business continues to finance this aggressive expansion. Ad impressions grew 19% and price per ad rose 12%, supported by a base of 3.56 billion daily active users across its Family of Apps. "Our biggest milestone so far this year has been the release of our Muse family of models," chief executive Mark Zuckerberg noted. JPMorgan highlighted the company's new Model API pricing as a critical first step toward monetizing its AI investments beyond advertising.
Spending Anxiety Tests Investor Patience
Despite this operational strength, the sheer scale of the capital deployment is testing the market. Reality Labs posted a $4.03 billion operating loss in the quarter, and investors are comparing Meta's $145 billion outlay against Alphabet's $175 billion to $185 billion 2026 capex guidance. Additional pressure comes from a reported potential $10 billion Anthropic partnership and looming 2026 youth-related regulatory trials that could produce material judgments.
Wall Street consensus remains firmly bullish, with 57 buy ratings against six holds and zero sells. UBS maintains a buy rating with a $766 price target, while even the most conservative bear-case projections value the stock at $765, representing an 18% premium to its current price near $646. More aggressive targets look for a return above $1,000. The divergence between a blowout quarter and a negative stock reaction underscores a broader market tension: investors are no longer rewarding AI spending for its own sake, but demanding a clearer path to returns.
