Meta stock falls 9% after earnings

Meta just ran into the classic Big Tech problem — great quarter, bad reaction. The company posted strong first-quarter 2026 results on April 29, then watched the stock slide about 9% the next day. The reason was not weak ads or collapsing profits. It was spending. Investors looked past the beat and fixated on how much cash Meta now plans to pour into AI infrastructure. (investor.atmeta.com) ### What did Meta actually report? The headline numbers were strong. Revenue came in at $56.31 billion, up 33% from a year earlier. Operating income was $22.87 billion, and net income jumped 61% to $26.77 billion. Ad impressions rose 19%, average price per ad rose 12%, and family daily active people reached 3.56 billion. On the surface, this looked like a quarter that should have made investors happy. (investor.atmeta.com) ### So why did the stock drop? Because Meta also told investors the AI buildout is getting even more expensive. The company raised its 2026 capital expenditure guidance to $125 billion to $145 billion. That is a huge number even by hyperscaler standards, and it came with a reminder th(investor.atmeta.com) fast. (investor.atmeta.com) ### Why does capex matter this much? Capex is the money Meta spends on the physical backbone of AI — data centers, networking gear, chips, and related infrastructure. Investors can live with heavy spending when the payoff is easy to see. The catch is that Meta’s clearest AI payoff tod(investor.atmeta.com)te returns beyond making the core ads engine more efficient. (finance.yahoo.com) ### Didn’t profits also look unusually strong? Yes — and that matters. Meta’s EPS was boosted by an $8.03 billion income tax benefit tied to Treasury Notice 2026-7. The company itself noted that excluding that benefit, diluted EPS would have been $3.13 lower. So even though the quarter was strong operationally, some of the eye-popping profit growth was not the kind investors automatically treat as repeatable. (investor.atmeta.com) ### What did Wall Street do with that? JPMorgan downgraded Meta to Neutral from Overweight on April 30 and cut its price target to $725 from $825. The core argument was pretty simple — Meta is still growing fast, but the path to returns on this level of AI spending is getting harder t(investor.atmeta.com)is is not a consensus collapse. It is more like a reset in how much uncertainty investors are willing to price in. (finance.yahoo.com) ### Is this about weak demand for Meta’s products? Not really. The ad business is still the stabilizer here. Revenue growth was strong, and the company kept its full-year expense outlook steady even while lifting capex. User growth had a wrinkle — Meta said the slight quarter-over-quarter dip in daily activ(finance.yahoo.com)e stock sold off. Spending was. (investor.atmeta.com) ### Where does Bill Ackman fit in? He is the reminder that not everyone reads this the same way. Pershing Square disclosed a major Meta position earlier this year, amounting to about 10% of its capital at the end of 2025. That does not cancel the market’s concerns, but it shows there is still a serious bull case — that Meta’s AI spending is not wasteful empire-building, but a long-term platform investment. (cnbc.com) ### Bottom line? Meta did not fall because the business broke. It fell because the bill for AI keeps getting bigger, and investors want clearer proof that the payoff will be bigger too. For now, the market is saying ad growth alone is not enough to justify a $145 billion infrastructure sprint. (investor.atmeta.com)ult.aspx))