Meta, which owns Instagram, WhatsApp and Threads, has been spending heavily on AI infrastructure and high compensation for employees.Benoit Tessier/Reuters
Meta Platforms META-Q raised its annual capital spending forecast on Wednesday, plowing billions more into artificial intelligence infrastructure even as it grapples with possible losses from a global youth social media backlash.
The Facebook-parent projects 2026 capital expenditure between US$125-billion and US$145-billion, compared with its prior forecast of US$115-billion to US$135-billion.
Shares of the company fell more than 6 per cent in extended trading.
The company also warned that legal and regulatory blowback in the European Union and the U.S. “could significantly impact our business and financial results,” after years of mounting criticism about children’s safety on social media.
“We continue to see scrutiny on youth-related issues and have additional trials scheduled for this year in the U.S., which may ultimately result in a material loss,” it said. Meta is facing a rising number of teen social media bans around the globe, as well as thousands of court cases by individuals, municipalities, states and school districts alleging it designed its platforms to be addictive and harmful to children.
More court cases are due in the coming months, including a second part of a New Mexico trial and a California case expected to test claims central to nearly 2,000 similar lawsuits filed by U.S. school districts.
Matt Britzman, an analyst at Hargreaves Lansdown, said Meta’s higher capital spending spooked investors but is likely overblown as it reflects more expensive memory prices rather than changes to Meta’s investment plan.
Meta slashes 10% of work force as Microsoft offers buyouts
Meta reported first-quarter revenue of US$56.31-billion, beating the LSEG-compiled analysts’ average estimate of US$55.45-billion.
It expects second-quarter revenue of US$58-billion to US$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 one of its apps in a day, rose 4 per cent in the first quarter from a year earlier to 3.56 billion. The results come weeks after Reuters reported first about Meta’s plans for sweeping layoffs, as CEO Mark Zuckerberg attempts to aggressively integrate AI into the company’s workflows and reshape its workforce around the technology.
People are using AI to build more efficiently and Meta is building the next evolution of itself around such people, Zuckerberg said on a conference call after reporting financial results. He said the company is streamlining so its teams are not bigger than necessary.
But results were eclipsed by faster growth by other tech companies. “Meta’s results met expectations, but failed to impress investors, especially in the context of much stronger results from Google,” said Gil Luria, managing director of D.A. Davidson. He said investors were also concerned that Meta’s spending plans rose without a corresponding reduction in operating expenses. Google parent Alphabet topped Wall Street estimates for quarterly revenue and profit. Meta, which owns Instagram, WhatsApp and Threads, has been spending heavily on AI infrastructure and high compensation for employees such as those working in its Meta Superintelligence Labs, which released its first AI model called Muse Spark earlier this month.
Zuckerberg said Meta is rolling out more than 1 gigawatt of custom chips that it is developing with Broadcom, as well as a “significant amount” of AMD chips.
The company’s robust ad platform, which offers tools for automating and personalizing advertisers’ campaigns, has remained its growth engine and has helped support its investments in AI infrastructure.
Meta launched ads on messaging service WhatsApp and microblogging platform Threads last year, intensifying competition with platforms such as Elon Musk’s X. Simultaneously, Instagram’s Reels continue to jostle with TikTok and YouTube Shorts in the lucrative short-video market. For the first time, Meta is projected to overtake Alphabet as the world’s biggest online advertiser, with an expected US$243.46-billion in global net ad revenue this year, excluding traffic acquisition costs. The forecast, by research firm eMarketer, puts the Google- and YouTube-parent’s annual ad revenue at US$239.54-billion.
Last week, the company expanded the availability of its Meta AI business assistant, designed to help advertisers optimize campaign performance and resolve technical issues through real-time guidance. Meta is installing new tracking software on U.S.-based employees’ computers to capture mouse movements, clicks and keystrokes to train its AI models, part of a broad initiative to build AI agents that can perform work tasks autonomously, Reuters reported last week. Meanwhile, China ordered Meta to unwind its US$2-billion-plus acquisition of AI startup Manus on Monday, as Beijing tightens scrutiny of U.S. investment in domestic startups developing frontier technologies.