Meta Platforms experienced a significant market selloff on Thursday as the company reported negative free cash flow of $2.12 billion in the third quarter while simultaneously raising its capital expenditure guidance [1]. The social media giant increased the floor of its full-year capex range from $130 billion to $135 billion, with the ceiling remaining at $145 billion, signaling an intensified commitment to artificial intelligence infrastructure investments [1]. This aggressive spending trajectory has triggered investor concerns about the company's financial health, as evidenced by Meta's five-year credit default swap spreads reaching all-time highs—a key indicator of deteriorating credit sentiment [1].
Despite the concerning cash flow dynamics, Meta's core business performance showed strength in the third quarter, with revenue jumping 26% year-over-year to $64.60 billion, exceeding analyst expectations of $63.37 billion [1]. However, earnings per share of $3.83 fell significantly short of Wall Street's anticipated $5.75 per share, though the article notes comparability concerns [1]. The company's aggressive capex spending appears to be weighing heavily on profitability metrics and cash generation, driving the 6% decline in Meta stock on Thursday [1].
In a strategic move to maintain founder control amid its capital-intensive growth phase, Meta announced the creation of a new class of nonvoting Class C common stock designed to preserve the "founder-led structure" and "provide Meta the ability to finance its growth" [1]. The SEC filing also revealed that CEO Mark Zuckerberg had considered relocating from California due to potential liability from a proposed "California Wealth Tax," but the new stock structure was instrumental in convincing him to remain with the company [1]. These governance changes underscore Meta's determination to pursue its AI ambitions while maintaining leadership continuity despite mounting financial pressures.
CONCLUSION
Meta's negative free cash flow and raised capex guidance have triggered a sharp market correction, with the stock declining 6% and credit default swap spreads hitting all-time highs, reflecting investor concerns about the sustainability of the company's aggressive AI spending strategy [1]. While revenue growth remains robust at 26% year-over-year, the deteriorating cash position and earnings miss signal that near-term profitability may be sacrificed for long-term AI infrastructure development [1]. The introduction of nonvoting Class C shares suggests management is preparing for a prolonged investment cycle while maintaining founder control [1].