Meta falls as investors balance Muse growth with rising AI costs

The stock has gained more than 5% this year and, if current losses hold, is set to erase about $50 billion from the company's market value.

The downbeat reaction comes despite Meta reporting stronger-than-expected quarterly revenue, forecasting fourth-quarter sales above Wall Street estimates and highlighting rapid adoption of its new AI agent app, Muse

The earnings report came hours after a New Mexico judge ordered the company to pay a $25 billion penalty in a data-privacy case linked to Cambridge Analytica. Meta said it plans to appeal the ruling

The Instagram parent is spending heavily to support its AI plans, with an expected annual capital expenditure forecast between $135 billion and $145 billion. It also reported a free cash flow deficit of $2.12 billion in the third quarter, compared with positive free cash flow a year earlier

Deutsche Bank analyst Benjamin Black said Meta's AI investments were generating stronger advertising performance and engagement, creating a "positive thesis creep" around the stock as investors increasingly view computing infrastructure as a revenue-generating asset rather than a cost burden

Meta also announced plans to create a new class of non-voting Class C shares, giving the company additional flexibility for acquisitions and employee compensation while preserving CEO Mark Zuckerberg's voting control

At least 13 brokerages have raised their price targets on the stock after the results, according to data compiled by LSEG.