Meta stock sinks nearly 7% as AI spend pushes free cash flow negative

Meta’s third-quarter results showed a sharp tension between growth and cash use. Revenue rose 26% year over year to $64.60 billion, yet free cash flow was negative $2.12 billion. Shares fell nearly 7% on Thursday as investors focused on the cash pressure.

The company also increased planned capital spending. Meta now expects full-year capital expenditures of $135 billion to $145 billion. It previously set the lower end at $130 billion, so the floor rose by $5 billion. Much of this spending is tied to its deeper artificial-intelligence plans.

The combination matters because fast revenue growth did not translate into cash available after investment. Investors also pushed Meta’s five-year credit-default-swap spread to an all-time high, signaling greater credit concerns. Meta is therefore pursuing expansion while markets question how comfortably its cash generation can support the spending.

Free cash flow is the cash a company generates from its business after paying for capital investments, such as equipment, facilities, and technology. It shows how much cash remains for uses such as debt repayment, acquisitions, shareholder returns, or additional investment. It differs from accounting profit because it focuses on actual cash movement.

When free cash flow is negative, the company spent more cash on operations and capital investments than it generated during that period. Meta reported negative $2.12 billion in third-quarter free cash flow. That does not automatically mean the business is failing, but it shows that cash demands exceeded cash generation at that time.

Meta’s result reflects a major investment push. The company is spending more on artificial intelligence infrastructure while revenue grows rapidly. Investors must therefore judge whether future growth can eventually produce enough cash to support these investments. The negative figure also helps explain the market’s credit concerns.

Capital expenditures, or capex, are major investments in long-lived assets and infrastructure. For Meta, the planned spending is connected to its expanding artificial-intelligence plans. The company’s updated full-year forecast is $135 billion to $145 billion, giving investors a clearer view of the scale of its investment program.

The important change was at the bottom of the range. Meta previously expected at least $130 billion in capex. It raised that minimum to $135 billion, an increase of $5 billion. The top end remained $145 billion, so the updated range is $5 billion narrower at the low end than the earlier range implied.

This matters because capital spending uses cash before any future benefit appears. Meta’s third-quarter free cash flow was negative $2.12 billion, showing the immediate financial effect of heavy investment. The higher spending floor suggests the company expects to maintain an aggressive infrastructure buildout rather than treat the third quarter as a temporary spike.

Revenue records sales, but free cash flow measures cash remaining after business costs and capital investments. AI infrastructure often requires large upfront payments for data-center capacity, computing equipment, and related systems. Those payments occur before the resulting products or services generate enough additional cash.

For example, Meta can report strong advertising revenue while spending heavily to expand the infrastructure supporting its AI plans. If those infrastructure payments are larger than the cash produced by operations, free cash flow becomes negative. The company can still be growing quickly, because sales and cash investment are measured differently and happen on different schedules.

That is the pattern Meta reported. Third-quarter revenue rose 26% to $64.60 billion, but free cash flow was negative $2.12 billion. Meta also raised its full-year capex floor to $135 billion. The immediate trade-off is weaker cash generation, while the hoped-for payoff is future growth from the expanded AI investment.

A five-year credit default swap, or CDS, is a financial contract tied to a borrower’s debt over five years. The buyer pays a premium for protection if the borrower fails to meet its obligations. The CDS spread is that premium, usually expressed relative to the debt’s value. It acts as a market-based signal of perceived credit risk.

When the spread widens, protection becomes more expensive. That usually means investors view a default or serious financial stress as more likely, or they demand more compensation for taking the risk. It does not prove that default will occur. It reflects changing prices in the credit market.

Meta’s five-year CDS spread reached an all-time high on Thursday. The article links this signal to growing credit concerns as Meta leans deeper into AI spending. Negative third-quarter free cash flow and the higher capex forecast intensified attention on whether the company’s cash generation can support its investment plans.

Nonvoting Class C shares are shares that can provide an economic ownership interest without the usual ability to vote on company matters. Creating this class can let a company issue stock to finance growth while limiting the voting influence attached to those new shares. The article says Meta’s plan is meant to maintain its founder-led structure.

The key mechanism is separation of ownership from voting power. If Meta issues Class C shares, investors could provide capital through the new stock, while those shares would not add equivalent votes. That can help protect Mark Zuckerberg’s influence over company decisions, even as Meta raises money for expansion.

Meta disclosed the proposed stock class during its earnings release. The filing said the plan would maintain the founder-led structure and provide Meta the ability to finance growth. The article also says the plan helped convince Zuckerberg to stay in California after concerns about a possible California Wealth Tax.

Revenue is the money a company records from selling its products or services before expenses. Earnings show profit after recognized costs, usually through measures such as earnings per share. Capital expenditures measure spending on long-term assets and infrastructure. Free cash flow measures cash generated after operating needs and capital investments.

Meta illustrates the difference. Its third-quarter revenue was $64.60 billion, up 26% from a year earlier. Earnings per share were reported at $3.83. At the same time, the company spent heavily on infrastructure, and free cash flow was negative $2.12 billion. Strong sales and reported earnings therefore did not produce positive free cash flow.

Each measure answers a different question. Revenue shows business scale, earnings show accounting profitability, capex shows investment intensity, and free cash flow shows immediately available cash. Together, they give a fuller picture. Meta’s higher $135 billion-$145 billion capex forecast suggests cash pressure could remain important as AI spending continues.