Meta Platforms shares declined roughly 2% on Tuesday, stretching their losing streak to a fifth consecutive session as investors turned cautious before the company's third-quarter earnings release, scheduled for Wednesday after the closing bell. The stock has now retreated more than 12% from its late-September peak of $779.82.
The pullback reflects growing unease over Meta's aggressive artificial intelligence investment strategy. The company has guided 2026 capital expenditure to a range of $130 billion to $145 billion, roughly double the prior year's outlay. For the September quarter, Visible Alpha data points to capital spending of $41.68 billion, underscoring the sheer scale of the buildout.
Earnings history amplifies caution
Recent quarters have shown how sensitive the stock is to spending disclosures. In the prior quarter, Meta shares dropped 8% to 9% after earnings per share of $6.18 fell short of the $7.22 consensus estimate. Even with record revenue, investors focused on climbing AI infrastructure costs and free cash flow that shrank to $784 million.
A similar pattern emerged after first-quarter results this year, when the stock slid 8.8% despite a 57% earnings-per-share beat, following management's decision to raise its full-year AI capital expenditure forecast. That recurring reaction suggests the market is weighing the cost of expansion as heavily as the growth it produces.
Muse offers a counterweight
On the product side, Meta's Muse AI agent has drawn analyst attention. Sensor Tower data shows the product has accumulated 10.9 million downloads since its September 8 launch. Deutsche Bank analyst Benjamin Black estimates Muse could generate as much as 8% of Meta's revenue by 2030, equivalent to roughly $36 billion in sales.
Price targets on Wall Street have diverged. UBS raised its target to $884 from $715, pointing to the rollout of Business Agents and rising Muse usage as potential revenue drivers. Guggenheim also lifted its target to $850 from $700. Goldman Sachs moved the other way, cutting its target to $762 from $860 on concerns that operating expenses could climb in 2027.
What Wednesday's report will reveal
Meta's results and management commentary will give investors a chance to judge whether the AI spending trajectory can be justified by future growth. The company must balance building out its AI capabilities with convincing shareholders that the expansion will deliver sustainable returns.
While Muse's adoption and the prospect of AI-driven revenue offer reasons for optimism, the scale of planned investment remains a key source of uncertainty. Investors across the technology sector are becoming more selective about the returns they expect from AI infrastructure, and warning signs are emerging around the enormous capital being committed to it.
This article is for informational purposes only and does not constitute financial advice.
