- Meta shares have fallen for four sessions ahead of Q3 earnings on October 21
- Investors focus on AI investments and capital expenditure plans for 2026-2027
- Meta projects $130-$145 billion capex for 2026 to expand AI infrastructure
Meta Platforms shares have come under pressure ahead of the Facebook parent's September-quarter earnings, with investors looking for signs that its massive artificial intelligence investments are beginning to deliver returns.
The stock has fallen for four consecutive trading sessions, slipping as much as 3.5% in recent sessions and trading around the $695-$701 range on Tuesday, October 20. Meta is scheduled to report its third-quarter results after the US market closes on Wednesday, October 21.
The earnings report comes at a crucial time for the company, as Wall Street weighs the strength of its advertising business against the rising cost of building AI infrastructure.
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Meta's capital expenditure plans are expected to be among the biggest talking points during the earnings call. The company has projected capital expenditure of $130 billion-$145 billion for 2026, reflecting its aggressive push to expand data centres and computing capacity.
Investors will be watching for any indication that spending could rise further next year. According to Investor's Business Daily, Evercore ISI analyst Mark Mahaney expects Meta to provide directional commentary on its 2027 spending plans, although formal guidance may not be offered.
Morgan Stanley analyst Brian Nowak has also highlighted the infrastructure requirements of Meta's AI products. In a note cited by Investor's Business Daily, Nowak estimated that the company could add around 13 gigawatts of capacity in 2027 and 2028 to support its various AI services.
Any indication that infrastructure costs are rising faster than expected could weigh on earnings forecasts and investor sentiment.
Meta's expanding AI ecosystem, including its Muse AI assistant, has attracted investor attention. However, the cost of serving a rapidly growing user base remains a concern.
Investors will look for signs of adoption and monetisation that can justify the company's heavy investment. The pace at which AI-powered tools improve advertising performance and generate additional revenue will also be closely watched.
Despite concerns over spending, Meta's core advertising business is expected to remain a key source of growth.
FactSet estimates cited by Investor's Business Daily put third-quarter revenue at $63.3 billion, up 23.6% year-on-year. Analysts expect earnings of $6.66 per share, although comparisons with the year-ago quarter are complicated by a large one-time tax charge.
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The market will assess whether advertising growth can offset rising infrastructure and operating costs.
Meta's operating margins and free cash flow will also be under scrutiny after higher spending weighed on cash generation in the previous quarter. Beyond the headline numbers, management's commentary on 2027 capital expenditure and total expenses could determine the stock's next move.
Options markets are pricing in a potential post-earnings move of around 6% in either direction, according to earnings previews cited by Investopedia and tastylive.
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