Meta shares fell 7.0% to close at $648.85 on 22 October, compared with a 1.2% decline in the S&P 500, after third-quarter spending on property and equipment exceeded operating cash flow for the first time since 2012, Opening Bell Daily reported. Meta released the results on 21 October and raised its 2026 capital spending outlook, Bloomberg News reported.
Key points
- Meta shares closed down 7.0% at $648.85 on 22 October.
- Third-quarter revenue rose 26% to $64.6 billion, while free cash flow turned negative.
- Meta raised the floor of its 2026 capital spending forecast from $130 billion to $135 billion.
- A new nonvoting share class will give Meta stock it can use to raise capital.
Meta’s revenue rises as cash flow turns negative
Third-quarter revenue rose 26% from a year earlier to $64.6 billion, above the $63.3 billion analyst estimate reported by Bloomberg News. Earnings were $3.83 a share. Meta forecast fourth-quarter revenue of $73 billion to $76 billion, against an average analyst estimate of $73.6 billion. The stronger sales figures accompanied a quarter in which cash spending on the build-out overtook cash generated by operations.
Free cash flow was negative $2.12 billion, Sri Lanka Guardian reported. investingLive put it at negative $2.1 billion and described it as Meta’s first negative quarter since 2012. The two reports give different figures for the quarter, although both put cash flow below zero.
Opening Bell Daily put purchases of property and equipment at $33.94 billion, against operating cash flow of $32.79 billion. investingLive reported third-quarter capital expenditure of $34.9 billion, up from $31 billion in the second quarter and $19.4 billion a year earlier. Meta’s 7.0% share decline came despite the revenue increase. The S&P 500’s 1.2% fall on the same day was smaller.
Meta lifts its 2026 spending floor
Meta now expects 2026 capital expenditure of $135 billion to $145 billion, lifting the bottom of its previous range from $130 billion, Bloomberg News reported. Meta has been building AI infrastructure while expanding Muse, its AI agent.
Future spending commitments reached about $825 billion, up from nearly $700 billion in July, according to investingLive. The total covers AI data centres, energy and computing arrangements. investingLive put leases that have yet to begin at $356 billion and non-cancellable contracts at $455 billion, with $121 billion due in 2027. Those commitments extend the cash demands of the build-out beyond the capital expenditure forecast for the current year.
The cost of insuring Meta’s debt against default also rose. Five-year credit default swap spreads increased by as much as 8.9 basis points to around 119.3 basis points a year on 22 October, according to ICE Data Services figures reported by Bloomberg News. A wider spread means a higher price for that protection. The shares and debt insurance both moved against Meta after its earnings announcement.
Class C shares expand Meta’s financing options
Meta also announced a nonvoting Class C common share to be distributed to existing investors as a dividend. Each holder is to receive one new share for each existing share, giving the distribution the effect of a two-for-one split. Meta said it could use the new stock to raise capital, compensate employees and make acquisitions, while preserving chief executive Mark Zuckerberg’s voting control.
The plan revisits a financing question Meta faced in 2017, when it abandoned an earlier proposal for a new share class intended to help Zuckerberg retain control. Bloomberg News put the company’s valuation at roughly $500 billion at that time, compared with nearly $1.8 trillion when it reported the latest plan. The new shares would give Meta another means of paying for expansion alongside cash from its operations.
Muse is one product Meta has offered as a reason for the investment. Zuckerberg said more than 10 million people in the United States and Canada had used the agent in its first six weeks. A previous AI Affairs account of Meta’s earnings reported his targets for Muse growth and costs alongside the 26% revenue increase. User uptake and Meta’s cash outlays are moving on different timetables.
Meta expects the nonvoting Class C share class to take effect on 19 January 2027. The company declared a one-time dividend of one new share for each Class A and Class B share, payable after the new class takes effect, Opening Bell Daily reported.
