Meta Platforms' earnings release showed third-quarter free cash flow of negative $2.12 billion, compared with positive $10.63 billion a year earlier. Meta last recorded negative quarterly free cash flow in the second quarter of 2012, when the company went public. Meta shares declined 6.6% to $651.05 during Thursday morning trading.
Meta generated $32.79 billion in operating cash during the third quarter. Spending on property and equipment totaled $33.94 billion, equivalent to 104% of operating cash generation. Finance-lease payments absorbed another $964 million. Capital spending, including leases, totaled $34.91 billion, equivalent to 54% of revenue. Free cash flow declined 63% to $11.05 billion over the year's first nine months. Free cash flow measures cash remaining after spending on buildings, servers and equipment, providing funding for buybacks, dividends and acquisitions without additional borrowing.
Meta held $82.45 billion in cash and marketable securities at September's end, against $80.92 billion in long-term debt. Meta's remaining net cash was approximately $1.5 billion. Meta narrowed the company's 2026 capital spending forecast to between $135 billion and $145 billion, raising the lower limit from $130 billion. Meta supplied no capital spending figure for 2027 but said the company expects continued aggressive investment. Meta's quarterly filing disclosed non-cancelable contractual commitments totaling $454.52 billion.
Meta's third-quarter revenue increased 26% to $64.60 billion, exceeding the company's forecast. Revenue in the corresponding year-earlier quarter was $51.24 billion. Meta forecast fourth-quarter revenue between $73 billion and $76 billion. Meta's workforce declined 15% from a year earlier to 66,775 employees.
Trade Nation senior market analyst David Morrison said Thursday that Meta, Tesla and IBM shares initially rose after quarterly results before reversing sharply. Morrison identified AI spending as the shared issue. Morrison said enormous future spending commitments lack clarity about when returns will arrive, or whether returns will materialize at all.
Apollo Global Management chief economist Torsten Slok identified hyperscalers' growth and earnings as vulnerable if data center construction takes longer than planned. Slok said Tuesday that supply, rather than demand, limits revenue while committed capital spending continues accumulating during periods of idle capacity. Dennis DeBusschere of 22V Research said less uncertainty about AI returns is necessary for higher valuations of AI infrastructure stocks.
Benzinga Analyst Ratings showed that seven firms revised their views on Meta on Thursday. However, six of those firms increased their price targets. Benzinga's coverage of 35 analysts showed a consensus Buy rating, comprising 31 Buy or Strong Buy recommendations and four Holds. The average target of $856 suggested approximately 26% upside relative to the premarket price. Susquehanna made the largest target increase, raising the firm's target from $650 to $850. Truist Securities had the highest target among recent revisions, setting a $1,000 target on October 13.
Analysts are valuing Meta's advertising business, while investors are accounting for the cost of AI investment. Negative free cash flow does not mean Meta faces financial trouble. Meta's core business continues to generate tens of billions of dollars each quarter. However, AI infrastructure spending now exceeds the cash that business generates for the first time since Meta's IPO year.
Meta Reports Negative Free Cash Flow for First Time Since 2012
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Summary
Meta Platforms reported a third-quarter free cash flow of negative $2.12 billion, the first time since 2012. The company spent $34.91 billion on capital expenditures, including leases, which made up 54% of its revenue. Shares dropped 6.6% to $651.05 in morning trading. Altcoins to watch may see shifts as trading volume reacts to Meta’s financial performance.
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