Meta Platforms shares extended their losing streak to five sessions on Tuesday, falling around 2% as investors grew cautious ahead of the company’s third-quarter earnings report, with rising artificial intelligence spending remaining a key concern.
The stock has declined more than 12% from its recent peak of $779.82, reached late last month. Meta is scheduled to report its third-quarter results on Wednesday after the closing bell.
The company’s aggressive AI investment plans have become a major focus for investors, who are looking for evidence that spending on computing infrastructure and new products will generate sufficient returns.
AI spending puts earnings in focus
Meta’s capital expenditure guidance for 2026 stands at $130 billion-$145 billion, roughly double the previous year’s spending.
Visible Alpha data put capital expenditure at $41.68 billion for the September quarter, highlighting the scale of investment involved in the company’s AI expansion.
Investors will be watching whether Meta can demonstrate how those investments will support revenue growth, particularly as advertising still remains central to its business.
The company’s recent earnings history has added to the caution.
In the previous quarter, Meta shares fell around 8%-9% after earnings per share of $6.18 missed expectations of $7.22.
Despite record revenue, investors were concerned about rising AI infrastructure expenses and free cash flow falling to $784 million.
In Q1 earnings reaction this year, the stock dropped 8.8% despite an earnings-per-share beat of 57%, after management increased its full-year AI capital expenditure forecast.
The recurring market reaction suggests investors are paying close attention to the cost of Meta’s expansion alongside its reported growth.
Muse offers a potential growth opportunity
Meta’s Muse AI agent has provided a more positive development. The product has accumulated 10.9 million downloads since its September 8 launch, according to Sensor Tower.
Deutsche Bank analyst Benjamin Black sees the product potentially accounting for up to 8% of Meta’s revenue by 2030, equivalent to approximately $36 billion in sales.
UBS raised its price target on Meta to $884 from $715, citing the rollout of Business Agents and growing usage of Muse as possible future revenue drivers. Guggenheim also lifted its target to $850 from $700.
Goldman Sachs took a more cautious view, cutting its price target to $762 from $860 on concerns that operating expenses could rise in 2027.
Investors await Meta’s next update
Wednesday’s earnings report will give investors an opportunity to assess Meta’s spending plans and progress in turning AI investments into commercial opportunities.
The company faces a balancing act between building out its AI capabilities and convincing shareholders that the expansion can deliver sustainable returns.
While Muse’s adoption and the potential for AI-driven revenue provide reasons for optimism, the scale of planned investment remains a key source of uncertainty.
Meta’s results and management commentary will be closely watched for signs that its AI spending trajectory can be justified by future growth, particularly as investors become more selective about the returns they expect from the technology sector, with warning signs looming around the enormous capital being put into AI infrastructure.
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