Meta Falls 3% as Higher AI Spending Outlook Overshadows Earnings Beat; Alphabet Dips, Microsoft Holds Steady

Heavier artificial intelligence (AI) spending plans are overshadowing a strong quarter at Meta Platforms (NASDAQ:META | META Price Prediction), where revenue and guidance both topped expectations. Meta Platforms stock is at $677.20, down 3% in morning trading.

Meanwhile, Alphabet (NASDAQ:GOOGL) stock is at $328, down 2%, slipping alongside Meta Platforms. Microsoft (NASDAQ:MSFT) stock is at $531, down 0.4%, holding nearly steady.

Selling pressure extends beyond the mega-caps. The Technology Select Sector SPDR ETF (NYSEARCA:XLK) is down 2.06%, and the Invesco QQQ Trust (NASDAQ:QQQ) is down 1.62%. So, META stock isn’t the only declining tech stock today.

Spending Outlook Overshadows Meta’s Revenue Beat

Meta Platforms reported Q3 2026 results on October 21, with revenue of $64.6 billion rising 26.1% year over year and topping estimates. Its Q4 2026 revenue guidance of $73 billion to $76 billion also came in ahead of expectations. Excluding a large legal settlement charge, Meta Platforms’ diluted earnings came to $7.40 per share, beating estimates and showing the underlying business carried the quarter.

Meta Platforms’ forward spending drew the sharper reaction from the market. Management at Meta Platforms raised the low end of its full-year capital spending outlook, narrowing the range to $135 billion to $145 billion from $130 billion to $145 billion, and lifted total expense guidance to $175 billion to $179 billion. A filing on October 22 also showed future spending commitments, largely for computing power and data center leases, well above the level reported in July.

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Why the Selloff Lands Hardest on Meta

Meta Platforms earns nearly all its revenue from advertising, while Alphabet and Microsoft also rent cloud computing capacity to outside customers. That split leaves Meta Platforms funding its data centers through its own apps and new products, with no outside renters to share the cost.

Inside the quarter, Meta Platforms spent $34.9 billion on capital expenditures and posted negative free cash flow of $2.12 billion. Operating margin at Meta Platforms contracted to 20% from 40% a year earlier, weighed down by the legal charge and higher infrastructure costs.

Core demand supports the bullish case at Meta Platforms, as ad impressions rose 10% and the average price for each climbed 14% year over year. Management credited AI with stronger engagement, better recommendations, and more efficient monetization. Partnership Ads also exceeded a $15 billion annual revenue run rate.

CEO Mark Zuckerberg struck a confident tone for Meta Platforms, saying, “Our investments are paying off, the core business is strong, and we’re seeing velocity across the board.” On the earnings call, he said more than 10 million people in the U.S. and Canada had set up Muse within its first six weeks, before any global launch. He also described Muse as “very compute intensive to run” in the near term, which ties that upside directly to the spending.

Meta’s AI Spending Plan Faces Its Payoff Test

Meta Platforms still needs to show the return on that spending. Management expects to improve Muse’s cost efficiency “by more than 10x in the next year,” a gain Zuckerberg said would let the product turn profitable once its revenue reaches scale.

Meta Platforms ended the quarter with $82.4 billion in cash and marketable securities against $83.7 billion of debt. A new class of publicly traded non-voting shares gives the company another funding path, though CFO Susan Li said there were no specific financing plans to announce.

Reality Labs losses are expected to narrow to about $15 billion in 2027 from $18 billion to $19 billion in 2026, as investment shifts toward AI. Investors sizing their positions should watch for whether Meta Platforms’ 2027 results show AI businesses adding revenue as management expects.

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