Meta’s revenue growth was not enough to ease investor concerns about the cost of its AI push. Capital spending reached $34.9 billion in the third quarter, exceeding operating cash flow, and the shares fell 7% on October 22 despite revenue rising 26% year over year and beating expectations. With Microsoft, Alphabet, Amazon and Intel due to report this week, investors are looking for evidence that AI investment can drive sustained growth without putting undue pressure on cash flow and profits.
Meta’s $34.9 billion spending bill tops operating cash flow
Meta’s results showed strong revenue growth alongside a sharp rise in investment. Revenue increased 26% from a year earlier, beating market expectations, but capital spending exceeded operating cash flow in the quarter. The 7% share-price decline on October 22 suggests investors were focused less on the revenue beat than on the scale of AI infrastructure spending and how it is being funded.
The company also announced a new class of non-voting Class C shares. Management said Meta may need to raise equity, adding potential financing needs to investors’ concerns about the effect of spending on cash flow. The company has not disclosed a fundraising amount or timeline, leaving the implications uncertain.
Microsoft, Alphabet, Amazon and Intel report this week
Microsoft and Alphabet are scheduled to report on Wednesday, followed by Amazon and Intel on Thursday. Together, the four companies account for about 15% of the Nasdaq 100’s weighting. The index is down roughly 7% this month, making the upcoming results significant not only for each company’s valuation but also for market expectations around large technology stocks and AI investment.
Investors face a difficult trade-off: higher capital spending can heighten concerns about cash flow and near-term profits, while cuts may be taken as a sign that a company is underinvesting in growth. Drew Matus, chief market strategist at MetLife Investment Management, said investors may penalize companies whether they raise or reduce capital spending. He said the market wants to see AI support long-term growth, while debate over jobs and profits is likely to continue.
Investors look for evidence of returns on AI spending
This week’s reports will be judged not just on spending totals, but on whether companies can connect their investments to business growth. Meta’s results show that a revenue beat may not reassure investors when capital spending significantly exceeds operating cash flow. The figures from Microsoft, Alphabet, Amazon and Intel will give investors fresh grounds to compare spending levels, cash-flow positions and prospects for their AI businesses.