Meta Platforms‘ (META +0.28%) latest earnings report sparked a sharp sell-off in the stock even though the underlying business continues to post healthy growth. Investors had to weigh strong advertising momentum against news that management plans to pour far more cash into AI (artificial intelligence) infrastructure over the next few years.

At its core, Meta runs some of the world’s largest social media apps, including Facebook, Instagram, WhatsApp, Messenger, and Threads. And management now wants to push far deeper into AI to keep those platforms sticky and to strengthen its advertising tools.

But will there be a payoff substantial enough to justify Meta’s unprecedented spending?

Image source: Getty Images.

Accelerating growth

Meta’s third-quarter revenue was $51.2 billion, up 26% year over year and faster than the low-20s growth rate it delivered in the prior quarter. Ad impressions across its apps increased 14% year over year while the average price per ad rose 10%. Meanwhile, Meta’s daily active users — the lifeblood of the company’s platforms — rose 8% year over year.

But not every metric was moving up. Free cash flow came in at $10.6 billion, down from $15.5 billion in the year-ago quarter as the company’s big spending weighed on cash flow.

Meta Platforms

Today’s Change

(0.28%) $1.70

Current Price

$611.59

AI spending raises the risk

Ultimately, the recent slide in Meta’s share price reflects worries that the next chapter of growth will require much heavier up-front investment than the last one. Even more, there’s a lot of uncertainty regarding the potential payoff of these investments.

These concerns aren’t surprising. After all, Meta expects to spend a staggering sum.

Management used the latest update to lift its spending plans. For 2025, Meta now expects total expenses between $116 billion and $118 billion and capital expenditures in a range of $70 billion to $72 billion.

The 2026 picture is even more aggressive. On the third-quarter call, Meta Chief Financial Officer Susan Li said the company is “still working through our capacity plans for next year, but we expect to invest aggressively to meet these needs. … We anticipate this will provide further upward pressure on our capex and expense plans next year.”

Management also guided that capital expenditures dollar growth will be “notably larger” in 2026 than in 2025 and that total expenses should grow at a significantly faster percentage rate. This outlook implies capital expenditures well beyond $100 billion next year. Growth in capital expenditures will be primarily driven by infrastructure investment to support computing power that can support AI-powered experiences, management explained during the company’s earnings call.

Given the market’s reactions to the news, investors are clearly reassessing how much of today’s cash flow will be needed to support tomorrow’s AI buildout and how risky this spending may be.

For investors willing to tolerate that uncertainty, the recent pullback creates an entry point that looks more appealing than it did before the sell-off. After all, Meta is still growing revenue at a healthy clip and has a strong balance sheet. It also generates substantial free cash flow even while it ramps up spending. Ultimately, the core ad business remains attractive, but the next few years will be defined by a massive bet on AI infrastructure that could either deepen Meta’s moat or leave the company with heavier costs and only modest incremental profit.

For now, the stock seems best suited for investors who can take a long view, handle uncertainty, and keep any position in the stock small. Those shareholders should closely monitor management’s updates on capital spending and expense growth, as well as track how AI features translate into incremental revenue or profit over time.