EL7.AI
StocksMedium•22 October 2026•
4 min read

Meta shares fall 7% as capital spending outlook rises and free cash flow turns negative

Key Facts

1Meta shares fell 7% during the October 22, 2026 session despite revenue beating analysts' expectations.
2Meta raised the lower end of its annual capital spending forecast to $135 billion from $130 billion and kept the upper end at $145 billion.
3Free cash flow showed a deficit of about $2.1 billion in the third quarter of 2026.
4Revenue grew 26% to $64.60 billion, compared with expectations of $63.34 billion.
5Spreads on Meta's 5-year credit default swaps widened by 7.6 basis points to a record 114.79 basis points.

Meta shares fell 7% during the October 22, 2026 session, according to the Associated Press, after results showed revenue beating analysts' expectations alongside an increase in the lower end of its annual capital spending forecast. The company raised the lower end of its forecast to $135 billion from $130 billion previously, according to the earnings summary published by Investing.com. It kept the upper end at $145 billion, putting its 2026 spending guidance at $135 billion to $145 billion, including principal payments on finance leases. In the third quarter, which ended in September, free cash flow showed a deficit of about $2.1 billion, according to the earnings summary published on the website. Reuters reported that this was the first time since 2012 that the company's free cash flow had turned negative, coinciding with its announcement of an increase in the lower end of annual investment guidance.

On the operating front, Meta generated third-quarter revenue of $64.60 billion, according to the Associated Press, as its advertising business continued to grow. Revenue in the same quarter a year earlier was $51.24 billion, giving the company annual growth of 26% in its latest results. Analysts had expected revenue of $63.34 billion, a level the actual results exceeded despite the shares falling during the session in which they were announced. Advertising activity was supported by a 10% year-on-year increase in ad impressions in the third quarter, according to the earnings call summary published on Investing.com. Alongside the increase in impressions, the average price per ad rose 14% from the same period a year earlier, with advertising growth combining an increase in recorded ad delivery and higher average prices.

In credit markets, spreads on Meta's 5-year credit default swaps widened by 7.6 basis points during the selloff, according to a Reuters report published via MarketScreener. Spreads reached a record 114.79 basis points, as the cost of insuring the company's debt against default rose alongside the decline in its shares. Cash flow concerns had weighed on trading in the shares before the latest earnings announcement, according to a report published by Investing.com on October 19. The website said the shares lost about 8% after the announcement of second-quarter 2026 results, when a sharp decline in free cash flow unsettled investors. The latest session's losses thus followed a decline after the previous quarter's results as well, with liquidity pressures featuring in investors' reaction to those results.

On the legal front, a judge in October ordered Meta to pay $25 billion to the state of New Mexico, according to the Associated Press, in a ruling concerning the misleading of Facebook users about their data privacy. The monetary judgment followed a jury finding that the company was liable for more than 43 million violations of the state's consumer protection laws. The liability determined by the jury concerned the company's practices toward users and their data privacy, the case in which the payment order was issued. Meta intends to appeal the ruling, and its chief legal officer said, according to the Associated Press: "We are confident we will prevail on appeal." The ruling came in the month after the end of the quarter in which the company recorded its free cash flow deficit.

On financing its expansion, the non-voting share class is intended to strengthen Meta's ability to raise capital for artificial intelligence infrastructure investments, according to the Associated Press. The agency described the purpose of the class as "enhancing the company's ability to raise capital for its investments in artificial intelligence infrastructure," among the options for financing this activity. For business in the fourth quarter of 2026, Meta expects revenue of between $73 billion and $76 billion, according to the agency. That range formed part of the guidance the company provided with its third-quarter results, setting its revenue target for the following period. As for investment beyond the current year, Meta did not provide an estimate for next year's spending when it announced the results.