Meta free cash flow turns negative as AI spending rises

Meta Platforms Inc. (META) reported its first quarterly outflow of free cash flow in company history, losing $2.12 billion in the third quarter of 2026. The cash burn followed a $34.91 billion expenditure on artificial intelligence capital projects. The company simultaneously raised the lower bound of its full-year 2026 AI capital expenditure guidance from the previously reported range, while maintaining the upper limit.

The disclosure triggered a sharp decline in AI-focused equities, contributing to a broad market sell-off on Thursday. Meta shares fell 7% as investors reacted to the cash flow shift. Other major AI infrastructure providers also saw significant losses: Advanced Micro Devices Inc. (AMD) dropped 8%, Micron Technology Inc. (MU) fell 6%, and NVIDIA Corp. (NVDA) declined 4%.

The Nasdaq Composite Index posted its worst single-day performance since early June, plunging 2.6% to close at 26,008.86. The S&P 500 Index tumbled 1.2% to finish at 7,663.43. In contrast, the Dow Jones Industrial Average (DJI) managed a marginal gain of 11.89 points to close at 52,867.98, despite dipping as much as 347.71 points at its intraday low.

Meta's third-quarter revenue increased 26% year over year to $64.6 billion, exceeding the Zacks Consensus Estimate of $63.4 billion. Adjusted earnings per share reached $7.40, surpassing the consensus forecast of $6.52. Advertisement revenues jumped 28% annually, with both advertisement impressions and price per advertisement climbing in double digits. The company plans to issue nonvoting shares to fund future AI investments without diluting CEO Mark Zuckerberg's control.

Market volatility spiked alongside the tech selloff, with the CBOE Volatility Index (VIX) jumping 14.1% to 19.03. Trading volume reached 18.79 billion shares, higher than the last 20-session average of 17.19 billion shares.

Crude oil prices also rose, adding to investor caution. Brent crude futures settled at $113.17 per barrel, a 4% increase, following reports that Iran-backed Houthis launched new strikes against Saudi Arabia's oil infrastructure. West Texas Intermediate crude futures rose 2.4% to settle at $99.47 per barrel.

Economic data released on Thursday showed mixed signals from the labor market and economic outlook. The Conference Board reported that its leading indicator was unchanged in September after a 0.1% decline in August. The Department of Labor reported that initial jobless claims decreased by 6,000 to 194,000 for the week ended Oct. 17, below the Zacks Consensus Estimate of 197,000. Continuing claims increased by 25,000 to 1.728 million for the week ended Oct. 10.