Meta reported its second-quarter earnings after the bell on Wednesday, missing on earnings per share but beating on revenue. The company also narrowed its planned capital expenditure range for 2026. Meta stock fell nearly 8% in after-hours trading.
The company raised the bottom line of its capital expenditure estimates, increasing them to between $135 billion and $145 billion from $125 to $145 billion. Meta has said it plans to spend upward of $145 billion this year, with the bulk going to data center build-out.
On Tuesday, Meta and BlackRock announced an agreement to build a $14 billion, 1-gigawatt data center in Texas. BlackRock holds an 80% stake, Meta the remaining 20%. Earlier this month, CEO Mark Zuckerberg told Bloomberg it makes sense to explore leasing data center capacity to customers.
CFO Susan Li said Meta expects capital expenditures to be between $130-145 billion for the year, narrowed from prior outlook. Unlike Alphabet and Microsoft, Meta lacks an established cloud business generating revenue from infrastructure, noted Motley Fool analyst Anders Bylund.
“The hyperscalers can point to direct revenue,” Bylund said. “Meta has to point to Zuckerberg’s long-term AI conviction.” Meta is reportedly developing a cloud business to sell access to AI models and excess computing power.
Investors are taking another expensive bet on Zuckerberg’s vision. His metaverse bet has racked up more than $50 billion in losses so far. A key question is whether AI spending is boosting Meta’s digital advertising business. Forrester analyst Mike Proulx warned of a “trust toll” from AI-generated advertising tools, which have caused chaos for some brands.
The tech industry’s compute rush continues. Bloomberg reported Meta is developing plans to build its own cloud infrastructure to lease to customers. Analyst opinions are mixed. Needham’s Laura Martin maintains a Hold, citing “strategy diffusion” that destroys economic value. RBC’s Brad Erickson sees Meta as the tech stock with the biggest opportunity for sentiment improvement, maintaining an Outperform rating and $810 target.
Deutsche analyst Benjamin Black rates Meta a Buy with $800 target, highlighting strong advertising growth and promising AI monetization. BofA’s Justin Post maintains a Buy and $835 target, noting high capex doesn’t negatively impact his bullish thesis.