Meta’s Capital Spending Hits $34.91 Billion, Pressuring Cash Flow
Key Facts
Meta’s third-quarter 2026 results showed capital expenditures of $34.91 billion against operating cash flow of $32.79 billion, leaving free cash flow at negative $2.12 billion. Revenue rose 26% year over year to $64.60 billion, while operating income fell 37% to $12.99 billion, according to the company’s filing with the U.S. Securities and Exchange Commission. The figures mean revenue growth did not prevent investment spending from exceeding cash generated by operations during the quarter. In an analysis published by Citadel Securities, the firm warned that the economy’s and stock market’s exposure to AI investment leaves “extremely little room for error” if confidence in the growth story fades. Citadel’s focus is on the ability of companies and projects tied to AI to finance expansion and turn it into revenue, as infrastructure costs rise.
Meta raised the lower end of its 2026 capital expenditure forecast to $135 billion, from a previous range starting at $130 billion, while keeping the upper end at $145 billion. The revision follows a quarter in which capital spending exceeded operating cash flow and signals continued spending expansion through the rest of the year. Citadel estimated the company’s annual guidance implies additional capital expenditure of about $49 to $59 billion in the fourth quarter. Meta, meanwhile, forecast revenue of $73 billion to $76 billion for the same period, according to its filing. These forecasts put the paths of spending and revenue at the center of investor scrutiny ahead of the company’s next results, after free cash flow turned negative in the third quarter.
Citadel said delays in permits and local approvals could slow data-center construction and raise its cost, delaying revenue from projects that require substantial investment. For leveraged projects, debt interest may accumulate during the delay before assets begin generating income. The firm also warned that falling Treasury yields do not guarantee lower financing costs if wider credit spreads offset the effect of declining yields. It put it this way: “Risk-free asset yields may fall while the cost of financing risk rises.” This divergence makes borrowing costs a factor in its own right in assessing the viability of expansion, even when government bond yields are moving lower.
Citadel said pressure on energy adds to data-center operating costs and weighs on purchasing power, with Brent crude trading above $117 a barrel during the week its analysis was published. The firm linked this to concerns over supply disruptions following attacks in Saudi Arabia and around Gulf shipping. It also cited reports of preparations for a possible resumption of strikes on Iran after the midterm elections, as part of risks that could prolong energy disruption. Citadel said an energy price shock coinciding with a slowdown in AI investment could leave the Federal Reserve facing weaker growth and uncomfortably high inflation. This challenge comes ahead of the Federal Open Market Committee meeting scheduled for October 27 and 28, with the press conference to be held on October 28.
The risks also extended to the political climate surrounding data-center construction. A Reuters/Ipsos poll during October showed support for construction restrictions among 69% of registered Democratic voters and 43% of registered Republicans. Citadel says local restrictions and approval delays could add time and cost to projects, while financing costs continue to accrue before revenue begins. On commercial demand, Ramp customer data showed corporate spending on AI tokens reached a new high in early October, while dollar spending growth slowed relative to usage growth because of lower prices and improved efficiency. On October 22, Meta shares fell 7% and the Nasdaq Composite dropped 2.6%, its biggest one-day decline since early June, according to The Associated Press. Meta shares closed at $642.4187 on October 26, after closing at $642.62 on October 23, according to EL7 data.