Meta Platforms’ stronger-than-expected first-quarter results were overshadowed by another increase in its artificial intelligence infrastructure budget, sending shares lower as investors weighed the cost of sustaining the company’s AI ambitions against the near-term strength of its advertising business.

The Facebook, Instagram and WhatsApp parent said on April 29 that it now expects 2026 capital expenditures, including principal payments on finance leases, to range from $125 billion to $145 billion. That is $10 billion higher at both ends of the range than its previous forecast of $115 billion to $135 billion. Reuters reported that Meta shares fell more than 6% in extended trading after the update, as the higher spending plan added to concerns over the cash demands of the company’s AI push.

The spending forecast was the dominant market signal from an otherwise robust quarter. Meta reported revenue of $56.31 billion for the three months ended March 31, up 33% from $42.31 billion a year earlier. Income from operations rose 30% to $22.87 billion, while net income increased 61% to $26.77 billion. Diluted earnings per share were $10.44, up from $6.43 a year earlier.

The profit figure was flattered by an $8.03 billion income tax benefit, which Meta said partly offset a non-cash tax charge recorded in 2025 after U.S. tax legislation. Excluding that benefit, the company said diluted earnings per share would have been $3.13 lower. Even so, the quarter showed that Meta’s core advertising engine remains powerful, with ad impressions across its Family of Apps rising 19% from a year earlier and average price per ad increasing 12%.

For investors, however, the key issue was not whether Meta can still generate revenue at scale. It was whether the company’s next phase of growth requires an increasingly large and uncertain capital commitment. The 2026 capex outlook implies a dramatic step-up in data-center capacity, computing infrastructure and related equipment, as Meta races to build the foundation for AI models, AI assistants, recommendation systems and advertising tools.

Meta said first-quarter capital expenditures were $19.84 billion. Free cash flow was $12.39 billion, compared with $10.33 billion a year earlier, while cash, cash equivalents and marketable securities totaled $81.18 billion at the end of March. Those figures give the company significant flexibility, but the rising capex range suggests a widening gap between the cash Meta can generate from its mature social platforms and the cash it intends to deploy into AI infrastructure.

Chief Executive Mark Zuckerberg framed the quarter as a milestone for Meta’s AI strategy. In the company’s earnings release, he said Meta had strong momentum across its apps and had released its first model from Meta Superintelligence Labs. He said the company was on track to deliver “personal superintelligence” to billions of people.

That message fits Meta’s broader strategic shift. The company is attempting to use AI across nearly every layer of its business: ranking content in feeds and Reels, improving ad targeting and creative tools, building consumer-facing assistants, supporting business messaging and eventually developing more autonomous agents. In that model, AI infrastructure is not a side project; it is becoming part of Meta’s operating base.

The market reaction showed that investors are still separating AI optimism from AI capital discipline. Meta’s ad business is performing well, and the company’s scale gives it an advantage in training and distributing AI tools. But higher capital spending raises questions about return timing, depreciation, free cash flow conversion and whether demand for AI products will justify another surge in infrastructure outlays.

Meta’s second-quarter guidance did little to reverse that focus. The company expects total revenue of $58 billion to $61 billion, with foreign exchange expected to provide an approximately 2-percentage-point tailwind to year-over-year revenue growth. That range broadly supports the view that advertising demand remains healthy, but it did not offset investor concerns over the larger spending envelope.

The company’s user metrics also drew attention. Meta said Family daily active people averaged 3.56 billion in March, up 4% year over year. It also said the metric declined slightly from the previous quarter because of internet disruptions in Iran and restrictions on access to WhatsApp in Russia. Reuters reported that this was Meta’s first quarterly decline in daily active people since it began using the metric across its platforms.

Although the year-over-year increase remains substantial, the sequential decline matters because Meta’s valuation depends on both user scale and monetization depth. The company can still grow revenue by showing more ads, improving ad prices and increasing engagement with AI-powered recommendations. But any sign that user reach is plateauing or becoming more exposed to geopolitical restrictions adds another variable to the investment case.

Meta’s Family of Apps continued to carry the company. Advertising revenue was $55.02 billion, compared with $41.39 billion a year earlier. Family of Apps revenue totaled $55.91 billion, while the segment generated $26.90 billion in operating income. Reality Labs, Meta’s virtual and augmented reality unit, generated $402 million of revenue and recorded an operating loss of $4.03 billion.

The segment split reinforces the core trade-off for shareholders. Meta’s advertising platforms remain among the most profitable digital businesses in the world, but they are funding multiple long-duration technology bets at once. AI infrastructure is now the larger and more urgent spending category, while Reality Labs continues to consume billions of dollars as Meta pursues mixed reality and longer-term computing platforms.

Legal and regulatory risk added another layer to the share-price reaction. Meta warned that youth-related scrutiny in the United States and European Union could significantly affect its business and financial results. Reuters cited the company’s warning that additional trials scheduled this year in the U.S. may ultimately result in a material loss.

The warning comes as social media companies face lawsuits and regulatory pressure over youth safety, addiction claims, content exposure and platform design. For Meta, these issues are financially relevant because regulatory outcomes could affect product design, engagement, advertising practices or compliance costs. They also create headline risk at a time when investors are already debating whether AI spending is running ahead of monetization.

Meta is also adjusting its workforce as it funds the AI buildout. Reuters reported that Chief Financial Officer Susan Li confirmed planned May layoffs during the earnings call. The company said headcount was 77,986 at the end of March, up 1% from a year earlier but down from 78,865 at the end of December. Meta maintained its 2026 total expense outlook despite the higher capital spending forecast, pointing to expected operational savings.

That cost-control message is important because Meta’s 2023 “year of efficiency” helped rebuild investor confidence after a period of heavy spending and slowing growth. The latest capex increase tests whether that discipline is still seen as credible. Investors may accept higher spending if it is paired with durable revenue acceleration, stronger margins or clear AI product adoption. They are less likely to reward spending increases that appear open-ended.

The broader technology context is also central. Meta is not alone in raising AI infrastructure investment. Microsoft, Alphabet, Amazon and other hyperscale technology companies are committing enormous sums to data centers, specialized chips, networking equipment and power access. The market has rewarded companies that can connect that spending directly to cloud revenue growth or enterprise AI demand. Meta’s challenge is different: much of its AI return is expected to flow through better engagement, advertising efficiency and consumer products rather than direct cloud sales.

That makes Meta’s investment case harder to measure in the short term. AI can improve ad ranking, content recommendations and campaign performance, but those gains are embedded inside the existing advertising business. Investors may see revenue growth without being able to clearly isolate how much came from AI spending. At the same time, capex is highly visible and immediate.

The latest quarter provided evidence that AI is helping Meta’s monetization engine. A 19% increase in ad impressions and a 12% increase in average price per ad suggest the company is finding ways to deliver more inventory while improving pricing. Better recommendation systems can keep users engaged longer, while AI tools can help advertisers generate creative content, optimize campaigns and measure performance. Those benefits support the argument that Meta’s AI spending is not purely speculative.

Still, the raised capex forecast indicates that infrastructure needs are moving faster than earlier plans. Rising component costs, expanding data-center requirements and competition for advanced AI hardware have all become defining constraints across the technology sector. For Meta, the risk is that the infrastructure race forces repeated upward revisions before investors see enough incremental revenue to justify them.

Meta’s balance sheet gives it room to keep investing. The company ended the quarter with more than $81 billion in cash and marketable securities, and its operating cash flow was $32.23 billion in the first quarter. Few companies can finance an AI buildout of this scale while maintaining high profitability. But the share decline shows that financial capacity alone is not the market’s only test. Investors are asking whether incremental AI dollars are being deployed with sufficient visibility on returns.

The stock reaction also reflects a comparison problem. When several major technology companies report in the same window, investors quickly sort them by the perceived quality of AI monetization. Companies showing direct cloud acceleration or clearer enterprise demand may receive more credit for capex increases. Meta’s results were strong, but its spending plan rose alongside youth-safety legal warnings, workforce changes and a sequential dip in daily active people.

For the technology sector, Meta’s report adds to a growing debate over whether AI infrastructure spending is a durable growth cycle or a margin risk. The largest platforms are building capacity on the assumption that AI demand will keep expanding across consumer, enterprise and advertising markets. If that demand materializes, early infrastructure investment could strengthen competitive moats. If monetization lags, the same spending could pressure free cash flow and valuation multiples.

Meta’s near-term task is to prove that its AI infrastructure is not simply a cost line but a revenue engine. That means demonstrating stronger engagement, better ad performance, useful AI assistants and productivity gains inside the company. It also means keeping operating expenses under control while absorbing a capital program that now sits far above historical levels.

The April 29 earnings report did not undermine Meta’s core business. Revenue growth accelerated, advertising remained resilient, margins were strong and the company retained substantial liquidity. But it did reset the market’s focus. The central question for Meta is no longer whether it is participating in the AI race. It is whether the company can turn one of the largest AI infrastructure budgets in corporate America into measurable, sustained returns before investor patience weakens.