Meta, the company behind Facebook, Instagram and WhatsApp, had a strong quarter for sales, yet its shares fell almost 7% on Thursday 22 October. The reason was AI. Meta spent so much building computing power for artificial intelligence that, for the first time since 2012, it paid out more cash than its business brought in, FX Leaders reports.
Good sales, huge bills
Meta’s revenue for the three months to the end of September was $64.6 billion, up 26% on a year earlier and ahead of what analysts expected. Advertising, which pays for nearly everything Meta does, was healthy: the number of ads shown rose 10% and the average price per ad rose 14%.
The problem was spending. Meta put $34.9 billion into “capital expenditure”, meaning long-term investments such as data centres, chips and servers. That was more than the cash its operations generated, leaving “free cash flow” (the money left after those investments) at minus $2.1 billion. Meta also expects to spend between $135 billion and $145 billion on these investments over the whole of 2026.
Commitments stretching years ahead
According to Business Matters, Meta says it has now committed about $825 billion to data centre and energy leases, computing power, hardware and cloud capacity, up from close to $700 billion it reported in July. The company also told investors it will need to raise “hundreds of billions of dollars” over the coming years to pay for its AI plans.
That is a big shift for a company that has long paid for its own growth from profits. It adds to a wider worry on Wall Street: tech companies are spending more than $1 trillion on data centres and chips, and more of that is now being funded with borrowed money.
The ripple effect
The share fall wiped more than $124 billion off Meta’s value, though it is still worth close to $1.65 trillion, Business Matters says. The jitters spread. The Nasdaq index fell 2.6%, its biggest one-day drop since early June, and chipmaker Nvidia, whose processors power most AI data centres, dropped 4.4%.
Not everyone was gloomy. Meta forecast fourth-quarter revenue of $73 billion to $76 billion, above expectations, and several banks, including Bank of America and UBS, raised their price targets for the stock, according to FX Leaders.
The quarter’s profit figures were also dragged down by a one-off $9.89 billion legal charge tied to a settlement with a group of US state attorneys general.
What it means for you
For most people, Meta’s apps will look the same tomorrow. But this report shows the scale of the AI bet big tech is making, and that investors are starting to ask when it will pay off. If you hold a pension, index fund or 401(k), you almost certainly own shares in Meta and Nvidia, so swings like this one reach ordinary savers too. And the data centres this money builds need land, water and electricity, which is why debates over local power bills and new data centre sites are likely to keep growing.