Meta Platforms Inc. (META) grew revenue 26% in the third quarter and beat its own forecast. It also spent more money than it brought in, a first in more than a decade of quarterly cash flow data.
Free cash flow came in at negative $2.12 billion, according to the company's earnings release. A year earlier, Meta generated $10.63 billion.
Meta's quarterly free cash flow had not dipped below zero since the second quarter of 2012, the quarter in which the company went public.
Shares were down 6.6% to $651.05 in morning trading on Thursday. Yet Wall Street analysts spent the morning raising their price targets.
Meta's Capex Now Exceeds Its Operating Cash
Free cash flow is the money left after a company pays for its buildings, servers and equipment. It is what funds buybacks, dividends and acquisitions without new debt.
Meta's operations generated $32.79 billion in the third quarter. Purchases of property and equipment reached $33.94 billion, or 104% of that amount. Another $964 million went to finance-lease payments.
Including leases, capital spending reached $34.91 billion, equal to 54% of revenue.
Over the first nine months of the year, free cash flow fell 63% to $11.05 billion.
The balance sheet tells the same story. Meta ended September with $82.45 billion in cash and marketable securities against $80.92 billion in long-term debt, leaving a net cash cushion of about $1.5 billion.
Meanwhile, the bill keeps growing. Meta narrowed its 2026 capex outlook to $135 billion to $145 billion, up from a low end of $130 billion. It gave no 2027 number, saying only that it expects to keep investing aggressively.
Its quarterly filing also lists $454.52 billion of non-cancelable contractual commitments.
The Business Is Not The Problem
Revenue rose to $64.60 billion from $51.24 billion a year earlier. Meta guided fourth-quarter revenue to $73 billion to $76 billion.
Headcount fell 15% from a year earlier to 66,775 employees.
The market's first reaction was positive. Then it reversed.
"In fact, the stocks of all three corporations rallied in the immediate aftermath of their quarterly updates, only to stop suddenly and reverse sharply," David Morrison, senior market analyst at Trade Nation, said in a note on Thursday, referring to Meta, Tesla and IBM.
He pointed to AI spending as the common thread.
"The future commitments are enormous. Yet there's little clarity over when, or even if, there will be a return on planned expenditure," Morrison said.
Why A Delay Would Hurt More Than A Slowdown
Torsten Slok, chief economist at Apollo Global Management, listed hyperscalers' growth and earnings among the losers if the data center buildout takes longer than planned.
"Revenue is capped by supply rather than demand, and committed capex keeps accruing while capacity sits idle," Slok said in a note on Tuesday.
At 22V Research, Dennis DeBusschere said reducing the uncertainty around AI returns is "necessary for a rerating higher" in AI buildout stocks.
Wall Street Pays For The Ads, Not The Bill
Analysts did not back away. Seven firms updated their views on Meta on Thursday, and six of them raised their price targets, according to MarketDash Analyst Ratings.
The 35 analysts tracked by MarketDash rate the stock a Buy on consensus, with 31 Buy or Strong Buy ratings and four Holds.
The average price target of $856 implies about 26% upside from the premarket price.
The largest increase came from Susquehanna, which lifted its target to $850 from $650. The highest target among recent moves belongs to Truist Securities at $1,000, set on Oct. 13.
The disconnect is the story.
Analysts are valuing Meta's advertising engine. Investors are pricing the AI bill.
The cash burn does not mean Meta is in trouble.
The company still earns tens of billions every quarter from its core business. However, for the first time since its first year as a public company, the AI buildout is costing more than that business brings in.
