Meta Platforms (META 0.55%) stock got hit with a big pullback this week following the company’s first-quarter results. The tech giant’s share price fell 9.8% across the stretch despite the S&P 500 gaining 0.9% over the same period and the Nasdaq Composite gaining 1.1%.

Meta published its Q1 results after the market closed on April 29 and actually reported sales and earnings for the period that exceeded Wall Street’s forecasts. Despite delivering topline and bottom-line performance that beat the average analyst estimates, there were elements contained in the report that caused investors to move out of the stock.

Meta’s Q1 beats weren’t enough to elevate the company’s valuation

Meta delivered non-GAAP (adjusted) earnings of $7.31 on revenue of $56.31 billion. Adjusted earnings crushed the market’s call for a per-share profit of $6.79, and sales breezed by the average analyst estimate’s call for revenue of $55.45 billion in the period. On the other hand, the company’s 3.56 billion in the quarter represented a sequential decline despite still being up 4% year over year. The company said that internet disruptions in Iran and restricted WhatsApp access in Russia weighed on user engagement in the quarter.

Meta Platforms

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What’s next for Meta?

In addition to concerns about user engagement last quarter, some investors also seemed worried about Meta’s capital expenditures — which actually came in lower than expected in the period. The company has been aggressively spending to build out its artificial intelligence (AI) and improve positioning in other key growth categories, and capex coming in moderately lower than expected in Q1 could merely be down to timing and not indicative of any material shifts in strategy.

Along those lines, the company actually said that it was updating its full-year capex target to between $125 billion and $145 billion — up from its previous target for capex between $115 billion and $135 billion. Meta’s big bets on AI look like smart long-term plays, but its massive spending push will create some near-term drag on earnings.