Meta Platforms (META) tumbled nearly 7% on Thursday, closing at $648.85, down $48.67, despite reporting record third-quarter revenue of $64.6 billion. The revenue figure was up 26% year-over-year and beat the $63.3 billion consensus estimate. Ad revenue rose 26% to $63.06 billion, and the company guided fourth-quarter revenue to between $73 billion and $76 billion.
The selloff came as investors focused on surging artificial-intelligence spending and worsening free cash flow. Meta posted its first negative quarterly free cash flow as a public company at -$2.12 billion, as capital expenditures of $34.91 billion exceeded operating cash flow of $32.79 billion. The company also raised the low end of its 2026 capex range to $135 billion to $145 billion, while total spending commitments grew to $825 billion from $700 billion in July.
Legal costs added to the pressure. Meta took a $9.89 billion legal charge tied to a teen mental-health settlement, dragging GAAP earnings per share to $3.83 versus the $3.56 expected. Excluding that charge, EPS would have been $7.40. A New Mexico judge separately ordered the company to pay $25 billion in a consumer-harms case before the report.
The decline dragged broader AI-related equities lower: the Nasdaq Composite fell about 2%, while Alphabet and Microsoft each lost about 2%. Meta's five-year credit default swap hit a record 119.3 basis points, signaling rising investor concern. Despite the negative reaction, analysts pointed to the Muse AI agent, which reached 10 million users in the U.S. and Canada within six weeks, with 25% of them using it daily. CEO Mark Zuckerberg said Muse could be “highly profitable over multiple years” if compute efficiency improves.
Meta also announced a non-voting Class C stock distribution to Class A holders, structured like a 2-for-1 split, effective January 19, partly to preserve Zuckerberg’s voting control if California's Proposition 40 passes. In Friday premarket trading, the stock was at $648.61, down 24 cents.
