Markets & Business
Meta stock dips as AI infrastructure spending projections rise
Meta reported $26.8 billion in Q1 net income, but shares fell more than 5% as the company projected higher infrastructure spending and continued losses in Reality Labs.
Meta released its quarterly earnings report on Wednesday evening, posting strong financial growth that was ultimately overshadowed by investor concerns over future spending. The company’s stock fell more than 5% in after-hours trading following the release.
For the first quarter, Meta reported the following results:
- Revenue: $56.3 billion, representing a 33% increase year-over-year.
- Net income: $26.8 billion, up 61% compared to the previous year.
- Reality Labs loss: $4 billion for the quarter.
Despite its overall profitability, Meta is still burning money on its hardware ambitions. The company lost $4 billion on its Reality Labs division—the unit responsible for AR and VR—in the most recent quarter. This loss is not an anomaly but rather average behavior for the division. Over its last 21 quarterly earnings reports, dating back to 2021, Meta has lost a total of $83.5 billion on Reality Labs, representing an average quarterly loss of about $4 billion.
As the company navigates its shifting priorities, its focus is turning heavily toward artificial intelligence, which demands even greater capital expenditures (capex). Meta projects its spending in 2026 will be between $125 billion and $145 billion, driven by infrastructure requirements and rising component costs. Meta CEO Mark Zuckerberg stated that the company is increasing its infrastructure capital expenditures forecast for this year. Zuckerberg attributed most of the increase to higher component costs, particularly memory pricing, and noted that the company is highly focused on increasing the efficiency of its investments. To support this push, Meta has also been building its technical team, poaching over 50 AI researchers and engineers from competitors last year to help ship its Muse Spark AI model.
The long-term financial outlook remains highly fluid. Meta CFO Susan Li explained that the company is not providing a specific outlook for 2027 capital expenditures, noting that they are undergoing a dynamic planning process to work through capacity needs over the coming years. According to Li, the planning is complicated by a consistent trend: “Our experience so far has been that we have continued to underestimate our compute needs,” referring to the company’s requirements for computing power.
Why it matters
Meta’s consistent, multi-billion dollar losses in its Reality Labs division are being overshadowed by its pivot to AI, where it faces increasing infrastructure costs and competitive pressure from AI leaders like OpenAI and Anthropic.