Meta Platforms' (META) shares fell early Thursday as the technology giant provided a soft third-quarter revenue outlook following an unexpected year-over-year decline in quarterly earnings, while it raised the lower end of its capital expenditure guidance.
For the third quarter, Meta expects revenue of $61 billion to $64 billion, assuming foreign exchange will be a roughly 1% headwind to year-over-year revenue growth. The midpoint of the guidance range is below the Street's consensus estimate of $63.18 billion.
The Facebook parent now anticipates capital expenditures to be in a range of $130 billion to $145 billion for 2026, lifting the $125 billion bottom end previously expected.
Meta expects its full-year 2026 expense between $165 billion and $169 billion, indicating a higher bottom end versus the previous estimate of $162 billion. The lower end of the outlook was increased to incorporate $2.4 billion in legal charges recognized in the second quarter, Chief Financial Officer Susan Li said in a statement.
"The opportunity in front of us is massive," Chief Executive Mark Zuckerberg said during an analyst call, according to a FactSet transcript. "We are now at a point where our investments in AI are accelerating every major part of our core business. As AI usage in our products and businesses continues to ramp, we continue to invest aggressively in infrastructure to meet the demand."
Meta shares fell 10% in the most recent premarket activity.
While Meta only modestly raised its 2026 capital expenditure guidance, the update was enough to keep investors focused on the returns from the company's AI investments, Wedbush Securities said in a note.
Meta is likely to continue ramping up capital spending to build out its AI initiatives, resulting in a longer timeline for returns on those investments, Wedbush analyst Ygal Arounian said.
"While the ad business is healthy, it is also decelerating," Arounian wrote. "We see risk-reward as balanced and stay on the sidelines."
Ahead of Meta's earnings release, Deutsche Bank, Wedbush Securities and BofA Securities had highlighted the strength of Meta's advertising business and signaled that the company could raise its capital expenditure outlook.
For the second quarter, the company's net income decreased to $6.18 a share from $7.14 the year before, while the Street was expecting the bottom line to increase to $7.19. Revenue rose 28% to $60.80 billion, ahead of the Street's view for $60.22 billion.
Advertising revenue in the second quarter jumped to $59.36 billion from $46.56 billion last year. Average price per ad increased 12% amid ad performance improvements and better macro conditions versus the prior-year period, among other factors, Li said during the call, according to a FactSet transcript.
Daily active users for Meta's family of apps, including Facebook, Instagram and WhatsApp, increased 3% on a yearly basis to 3.6 billion on average for June.
Capital expenditures stood at $31.08 billion for the second quarter. Free cash flow for the three months ended June 30 plunged to $784 million from $8.55 billion a year ago.
Microsoft (MSFT) on Wednesday reported fiscal fourth-quarter results that topped Wall Street's expectations, driven by a revenue surge in cloud computing platform Azure. The company expects fiscal 2027 capital expenditures to increase year over year, with first-quarter capex projected to exceed $50 billion.
