Meta Stock Drops 7% as Free Cash Flow Turns Negative and AI Capex Guidance Rises

Meta Platforms shares fell roughly 7% on Thursday after the social media company reported negative free cash flow for the third quarter and raised the lower bound of its full-year capital expenditure forecast, deepening investor concern about the cost of its artificial intelligence ambitions.

Free cash flow came in at a negative $2.12 billion during the quarter — a notable reversal for a company that has long generated substantial cash from its advertising business.

Meta now expects full-year capital expenditures to range from $135 billion to $145 billion, up from a prior range that had a $130 billion floor. The revision signals that infrastructure spending, driven largely by AI data center buildout, is accelerating faster than markets had anticipated.

The stock's decline coincided with a broader deterioration in Meta's credit profile. Spreads on the company's five-year credit default swaps reached all-time highs on Thursday, a sign that investors are demanding greater compensation to insure against the possibility of default as debt-financed AI spending intensifies.

Revenue for the quarter rose 26% from a year earlier, coming in at $64.60 billion, above the $63.37 billion analysts had expected. Earnings per share were reported at $3.83, though it was not immediately clear whether that figure was directly comparable to the $5.75 per share Wall Street had been projecting.

Meta also disclosed Wednesday that it intends to create a new class of nonvoting Class C common stock. The company said the structure is designed to maintain its "founder-led structure" and "provide Meta the ability to finance its growth," according to a regulatory filing.

The filing also addressed a potential complication involving CEO Mark Zuckerberg and California's proposed wealth tax. According to the document, Zuckerberg "could become liable for a significant, multi-billion-dollar tax payment based on his ownership of stock in the Company" if the tax were enacted, and he could leave the state as a result. The filing noted that Zuckerberg was convinced to remain in California under the new stock plan.

Meta's results arrive on a day when credit markets more broadly are flashing caution about the cost of AI infrastructure. Five-year CDS spreads have widened for CoreWeave, Oracle, and SoftBank Group — three companies central to the AI buildout spanning data centers, cloud services, and financing.

CoreWeave's five-year CDS spread reached 1,065.84 basis points on Oct. 21, according to FactSet data. Oracle's spread rose to 308.25 basis points on the same date, up from 141 basis points on Jan. 2 — a climb that follows S&P Credit Ratings downgrading Oracle's debt to the lowest level of investment grade in July. SoftBank's spread stood near a four-year high of 432 basis points on Oct. 20, up from 284 basis points at the start of the year.

North America's CDX High Yield index, which tracks default-protection costs across speculative-grade companies, had a five-year midpoint spread of 355.35 basis points on Oct. 20 — up about 39 basis points from the end of 2025, according to LSEG data — suggesting the pressure is not confined to a handful of AI-linked names.

Nvidia CEO Jensen Huang, speaking to reporters Thursday, described neocloud demand as "off the charts" while cautioning that capital is scarce. "The demand of the capital is much greater than the availability of the capital," Huang said, adding that he expects the imbalance to be resolved.

For Meta, the critical question is whether its AI infrastructure investments will generate returns sufficient to justify the scale of borrowing and spending. With free cash flow already negative and capex guidance moving higher, the company's ability to satisfy investors while continuing to fund one of the largest infrastructure buildouts in corporate history will be closely watched in the quarters ahead.

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