Meta shares slide as tech giant ups AI spending forecast, warns of youth retreat from social media
Meta Platforms raised its annual capital spending forecast on Wednesday, plowing billions more into intelligence infrastructure as it faces potential losses from youth attacks on social media.
The parent of Facebook plans to spend 2026 capital between $ 125 billion and $ 145 billion, compared to the previous forecast of $ 115 billion to $ 135 billion.
The company’s shares fell more than 6% in extended trading.
The company also warned that a backlash in laws and regulations in the European Union and the US “could have a significant impact on our business and financial results,” after years of mounting criticism over the safety of children on social media.
“We continue to see scrutiny on youth-related issues and we have additional trials planned for this year in the US, which may ultimately result in material losses,” he said.
Meta is facing a growing number of youth bans on social media around the world, as well as thousands of lawsuits filed by individuals, municipalities, counties and school districts who say it designed its platforms to be addictive and harmful to children.
More court cases will be required in the coming months, including the second part of the New Mexico case and the California case that are expected to test the claims central to nearly 2,000 similar lawsuits filed by US school districts.
Matt Britzman, an analyst at Hargreaves Lansdown, said Meta’s high spending spooked investors but may have been overblown as it reflected more expensive memory prices than changes in Meta’s investment strategy.
Revenue exceeds expectations
Meta reported first-quarter revenue of $56.31 billion, beating the average estimate of analysts polled by LSEG of $55.45 billion.
It expects second-quarter profit of $58 billion to $61 billion, largely in line with estimates of $59.5 billion.
Family daily active people (DAP), a metric Meta uses to track unique users who open any of its apps per day, rose 4% in the first quarter from a year earlier to 3.56 billion.
The results come weeks after Reuters first reported on Meta’s layoff plans, as CEO Mark Zuckerberg tries to integrate AI into the company’s operations and restructure its technology workforce.
“People are using AI to build more effectively and we’re building the next evolution of our company for these people,” Zuckerberg said on a conference call after reporting financial results. “We organize our groups well so that they are not bigger than they should be.”
But the results were overshadowed by the rapid growth of other technology companies.
“Meta’s results met expectations, but failed to impress investors, especially in the context of very strong results from Google,” said Gil Luria, managing director of DA Davidson. He said investors are also concerned that Meta’s spending plans have increased without a corresponding reduction in operating costs. Google parent Alphabet topped Wall Street estimates for quarterly revenue and profit.
Meta, which owns Instagram, WhatsApp and Threads, has been investing heavily in AI infrastructure and big compensation for employees like those working at Meta Superintelligence Labs, which released its first AI prototype called Muse Spark earlier this month.
Zuckerberg said Meta is shipping more than 1 gigawatt of custom chips it develops with Broadcom, as well as a “significant number” of AMD chips.
The company’s robust ad platform, which provides tools to automate and personalize advertisers’ campaigns, remains its growth engine and has helped support its investment in AI infrastructure.
Meta launched ads on messaging service WhatsApp and microblogging platform Wires last year, stepping up competition from platforms like Elon Musk’s X. At the same time, Instagram Reels continues to compete with TikTok and YouTube Shorts in the lucrative short video market.
For the first time, Meta is expected to overtake Alphabet as the world’s largest online advertiser, with an expected $243.46 billion in global ad revenue this year, excluding traffic acquisition costs. The forecast, by research firm Emarketer, puts annual ad revenue for parent Google and YouTube at $239.54 billion.
Last week, the company expanded the availability of its Meta AI business assistant, which is designed to help marketers improve campaign performance and solve technical problems through real-time guidance.
Meta is installing new tracking software on US workers’ computers to capture mouse movements, clicks and keystrokes to train its AI models, part of a broader plan to build AI agents that can perform tasks autonomously, Reuters reported last week.
Meanwhile, China ordered Meta to withdraw its $2 billion acquisition of AI startup Manus on Monday, as Beijing stepped up scrutiny of US investment in domestic startups developing cross-border technology.
