Key Points
Meta reports third-quarter results tonight after the close. Wall Street expects revenue of about $63.2 billion, up roughly 23% from a year ago.
Meta's free cash flow fell to just $784 million in the second quarter, down from $8.55 billion a year earlier, even as revenue rose 28% to $60.8 billion.
The company raised its 2026 capital spending forecast to $130 billion to $145 billion, from $115 billion to $135 billion earlier in the year.
Meta expects a one-time legal charge of about $10 billion this quarter, which will weigh on reported earnings, according to Bank of America.
Goldman Sachs estimates five AI hyperscalers, Meta among them, will push combined capital spending to about $1.2 trillion next year.
Meta's ad business is one of the best money machines ever built.
Last quarter, it took in $60.8 billion in revenue, up 28% from a year earlier. More than 3.5 billion people use its apps every day.
And yet, by the time Meta finished paying for servers, chips and data centers, it had just $784 million in free cash flow left over. A year earlier, that number was $8.55 billion.
That's the whole AI debate in one company. Tonight, Meta has to show investors the spending is worth it.
The Biggest Bet in Silicon Valley
Meta now expects to spend $130 billion to $145 billion on capital projects this year. Earlier in 2026, the forecast was $115 billion to $135 billion. That's roughly double what it spent the year before.
Most of that money is going into AI data centers, including its giant Hyperion project in Louisiana. Total expenses for the year are guided to $162 billion to $169 billion.
Some Wall Street estimates have Meta's free cash flow turning negative this quarter as the bills keep landing.
On top of that, Meta expects a one-time legal charge of about $10 billion, Bank of America says. That will make reported earnings look much worse than the underlying business, so investors will likely focus on revenue, spending and guidance instead of the headline earnings number.
Why the Timing Is So Awkward
Two weeks ago, a spending plan this big might have been cheered. Today, the market is asking harder questions.
Last week, the bonds of AI cloud provider CoreWeave fell to distressed levels, and the selling spread to anything tied to borrowed AI money. The Nasdaq fell about 4.5% for the week, its worst week since June.
Meta wasn't spared. As Dylan pointed out, bonds from a Blue Owl and Meta-backed vehicle funding the Hyperion project were trading around 92 cents on the dollar. His read: the data center trade is starting to deflate, and lenders are finally imposing discipline on the weakest projects.
Meta isn't CoreWeave. It has one of the most profitable businesses on earth paying for its buildout. But it's increasingly using outside money to help fund it, and higher interest rates make every dollar of that money more expensive. The 10-year Treasury yield spent much of last week above 5%.
Money didn't leave the market last week so much as it left one checkbook, the borrowed one funding the AI build-out. That's the week the market split in two. Meta's report is the first big test of which side of that split it lands on.
What Investors Want to See
Ad growth. Advertising is nearly all of Meta's revenue. Analysts expect ad revenue to rise about 24% to roughly $62.2 billion. Bank of America is above the crowd, forecasting total revenue of $63.8 billion, versus a consensus of about $63.3 billion.
Proof that AI pays. The bull case is simple: AI makes Meta's ads work better, so advertisers spend more. Better targeting means more sales for advertisers, which means higher prices for Meta's ad slots.
Muse. This is Meta's first report since the launch of its viral AI agent, Muse, which shot up Apple's App Store charts. Investors want to know how many people are using it, and whether it can make money.
2027 spending. This is the big one. If Meta signals capital spending will climb sharply again next year, investors will want to know how it plans to pay for it. After several quarters of being asked to absorb heavy spending today for better products tomorrow, investors are starting to demand clearer returns.
Not the Only Test Tonight
Meta isn't reporting alone.
Tesla, IBM, Lam Research and Texas Instruments all report after the close tonight. Abbott, NextEra and AT&T report this morning.
Together, they cover almost every corner of the AI trade: the spenders (Meta), the equipment makers (Lam), the chip suppliers (Texas Instruments), the enterprise software crowd (IBM), and Elon Musk's bet on robotaxis and robots (Tesla).
Thursday brings Lockheed Martin, Comcast, American Airlines, Blackstone and Dow, along with weekly jobless claims. American Express and SLB close out the week on Friday.
The Federal Reserve is in its quiet period ahead of its October 27-28 meeting. Consumer prices rose 3.7% from a year earlier in September, so a rate hike is still on the table.
What It All Means
For two years, the market rewarded companies for spending on AI. The more they spent, the higher their stocks went.
That changed last week. Now investors want to see the return, not just the receipt.
Meta has more money to spend than almost anyone. Tonight, it has to show it's spending it wisely.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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