Meta shares slide as tech giant hikes AI spending forecast, warns of youth social media backlash

The Facebook parent projects 2026 capital expenditure between $125 billion and $145 billion, compared with its prior forecast of $115 billion to $135 billion.

Shares of the company fell more than 6% in extended trading.

Mark Zuckerberg’s Meta Platforms raised its annual capital spending forecast even as it grapples with possible losses from a global youth social media backlash. Getty Images

The company also warned that legal and regulatory blowback in the European Union and the US “could significantly impact our business and financial results,” after years of mounting criticism about children’s safety on social media.

“We continue to see scrutiny on youth-related issues and have additional trials scheduled for this year in the US, which may ultimately result in a material loss,” it said.

Metais facing a rising number of teen social media bans around the globe, as well as thousands ofcourt casesby individuals, municipalities, states and school districts alleging it designed its platforms to be addictive and harmful to children.

More court cases are due in the coming months, including a second part of a New Mexico trial and a California case expected to test claims central to nearly 2,000 similar lawsuits filed by US school districts.

Matt Britzman, an analyst at Hargreaves Lansdown, saidMeta’s higher capital spending spooked investors but is likely overblown as it reflects more expensive memory prices rather than changes toMeta’s investment plan.

Meta is facing a rising number of teen social media bans around the globe. Above, relatives of victims at California trial in March. AFP via Getty Images

Revenue beats expectations

Metareported first-quarter revenue of $56.31 billion, beating the LSEG-compiled analysts’ average estimate of $55.45 billion.

It expects second-quarter revenue of $58 billion to $61 billion, largely in line with estimates of $59.5 billion.

Family daily active people (DAP), a metricMetauses to track unique users who open any one of its apps in a day, rose 4% in the first quarter from a year earlier to 3.56 billion.

The results come weeks after Reuters reported first aboutMeta’splans for sweeping layoffs, as CEO Mark Zuckerberg attempts to aggressively integrate AI intothe company’s workflows and reshape its workforcearound the technology.

CEO Mark Zuckerberg has attempted to aggressively integrate AI into the company’s workflows and reshape its workforce around the technology. Bloomberg via Getty Images

“People are using AI to build more efficiently and we’re building the next evolution of our company around these people,” Zuckerberg said on a conference call after reporting financial results. “We’re streamlining our teams so they aren’t bigger than they need to be.”

But results were eclipsed by faster growth by other tech companies.

“Meta’s results met expectations, but failed to impress investors, especially in the context of much stronger results from Google,” said Gil Luria, managing director of D. A. Davidson. He said investors were also concerned thatMeta’s spending plans rose without a corresponding reduction in operating expenses. Google parent Alphabettopped Wall Street estimatesfor quarterly revenue and profit.

Meta, which owns Instagram, WhatsApp and Threads, has been spending heavily on AI infrastructure and high compensation for employees such as those working in itsMetaSuperintelligence Labs, whichreleased its first AI modelcalled Muse Spark earlier this month.

Meta, which owns Instagram, WhatsApp and Threads, has been spending heavily on AI infrastructure and high compensation for employees such as those working in its Meta Superintelligence Labs. REUTERS

Zuckerberg saidMetais rolling out more than 1 gigawatt of custom chips that it is developing with Broadcom, as well as a “significant amount” of AMD chips.

The company’s robust ad platform, which offers tools for automating and personalizing advertisers’ campaigns, has remained its growth engine and has helped support its investments in AI infrastructure.

Metalaunched ads on messaging service WhatsApp and microblogging platform Threads last year, intensifying competition with platforms such as Elon Musk’s X. Simultaneously, Instagram’s Reels continue to jostle with TikTok and YouTube Shorts in the lucrative short-video market.

For the first time,Metais projected to overtake Alphabetas the world’s biggest online advertiser, with an expected $243.46 billion in global net ad revenue this year, excluding traffic acquisition costs. The forecast, by research firm Emarketer, puts the Google- and YouTube-parent’s annual ad revenue at $239.54 billion.

For the first time, Meta is projected to overtake google parent Alphabet as the world’s biggest online advertiser. AP

Last week, the company expanded the availability of itsMetaAI business assistant, designed to help advertisers optimize campaign performance and resolve technical issues through real-time guidance.

Metais installing new tracking software on US-based employees’ computers to capture mouse movements, clicks andkeystrokes to train its AI models, part of a broad initiative to build AI agents that can perform work tasks autonomously, Reuters reported last week.

Meanwhile, China orderedMetato unwind its$2 billion-plus acquisition of AI startup Manuson Monday, as Beijingtightens scrutiny of US investmentin domestic startups developing frontier technologies.