Meta shares plunge on escalating concerns over AI spending spree

Published Thu, Apr 30, 2026 · 08:09 AM

[SAN FRANCISCO] Meta Platforms shares slid after the company raised its spending outlook for the year, reigniting fears that the historic levels of investment it’s making to catch up in the artificial intelligence race will not pay off.

The social-media giant projected full-year capital expenditures between US$125 billion and US$145 billion, far exceeding analysts’ estimates and marking a roughly 7.4 per cent increase from what the company had previously projected. The company is dealing with “higher component pricing” and additional data centre costs, chief financial officer Susan Li said.

Meta CEO Mark Zuckerberg has signalled that his company will spend hundreds of billions of US dollars on AI infrastructure before the end of the decade. And that was before a memory chip shortage triggered a surge in prices. The firm has announced billion-dollar deals with Nvidia, Advanced Micro Devices and Broadcom for chips and other hardware and is building several massive data centres to power its efforts.

Meta shares fell 7 per cent in after-hours trading. They had risen 1.4 per cent this year through Wednesday’s (Apr 29) close in New York.

The higher spending “increases the stakes” for Meta, given it’s using its own AI system, “which still trails frontier lab peers,” Bloomberg Intelligence analyst Mandeep Singh said in a note. “So far, Meta’s stand-alone app has not had the amount of engagement vs. other frontier labs.”

Meta was not the only major technology company raising spending. Amazon.com said on Wednesday that it dropped more than anticipated on expanding data centre capacity in the first quarter. Alphabet’s Google raised its capital expenditure projections to as much as US$190 billion for this year. But Google still managed to spur a rally after beating on quarterly revenue and profit, signalling confidence in the company’s AI bets.

Meta reported first-quarter net income of US$26.8 billion, which included a one-time, non-cash income tax benefit of US$8 billion due to the implementation of the US tax policy signed into law in July. Analysts had estimated non-adjusted net income of US$17.2 billion, without anticipating the benefit.

Meta reported US$56.3 billion in first-quarter sales, beating Wall Street’s estimate of US$55.51 billion. It projected sales of US$58 billion to US$61 billion for this quarter, roughly in line with expectations.

Daily active people across all of Meta’s social media platforms slightly declined in the first quarter to 3.56 billion. The company cited the Internet disruptions in Iran and Russia’s restrictions on WhatsApp access. That marked the first drop since the company began using that metric.

More AI spending

To offset its AI spending, Meta has recently imposed a number of cost-cutting measures. Last week, it alerted staff in an internal memo that it would be cutting roughly 8,000 jobs and would not be filling 6,000 open roles. The company had already carried out other, more limited cuts earlier this year that hit its hardware division Reality Labs, among other teams.

Evercore ISI estimated that the May layoffs will save the company about US$3 billion annually, and that companies will rely more on AI agents to help do tasks that once required human employees. “We believe the industry is just beginning to realise the growth opportunities coming out of agentic deployments – and the stepped-up level of investments required to support them,” Evercore analyst Mark Mahaney said in a note to investors.

Still, US$3 billion is a small sliver of Meta’s total AI investments.

Earlier in April, Meta debuted its latest AI model, Muse Spark – the first released since Zuckerberg embarked on a multibillion-dollar overhaul of the company’s AI organisation last year. Additional large language models are expected to roll out later this year.

Meta’s mounting child safety litigation poses another headwind. In a landmark ruling in March, a jury found Meta liable for a 20-year-old woman’s long-standing mental health struggles, which she said were caused by her addiction to social media. While Meta must pay millions to the plaintiff, the ruling could expose the company to billions of US dollars in risk from additional lawsuits. Two other bellwether cases are scheduled to go to trial in California state court later this year.

Meta acknowledged on Wednesday that it continues to “see scrutiny on youth-related issues and have additional trials scheduled for this year in the US, which may ultimately result in a material loss.” BLOOMBERG