Meta Platforms has launched a $35 billion stock sale to fund its artificial intelligence build-out after losing nearly $400 billion in market value since late September. The capital raise follows massive infrastructure spending that pushed the social media giant's cash flow into negative territory.
Capex Surge Drives Negative Cash Flow
Meta expended $34.9 billion on chips, data centers, and equipment in the third quarter, which turned its free cash flow to negative $2.12 billion compared to positive $10.6 billion a year earlier. Long-term debt climbed to $80.9 billion from $58.7 billion at the end of 2025, and the firm completed zero share buybacks during the quarter. Operating margin halved to 20%, heavily impacted by a $9.89 billion legal settlement with 52 US state attorneys general over teen mental health claims. Despite these expenses, third-quarter revenue expanded 26% to $64.6 billion, while total annual spending for the year is projected to land between $135 billion and $145 billion. The massive AI outlay comes as investors closely track tech spending metrics, similar to recent market reactions seen when Alphabet Stock Drops Below 200-Day Moving Average Ahead of Q3 Earnings as AI Capex Concerns Mount.
Equity Issuance and Wall Street Price Targets
To raise additional capital without diluting Mark Zuckerberg's voting control, an SEC filing outlined plans for up to $60 billion in non-voting Class C share sales starting in early 2027. Major chipmakers NVIDIA, AMD, and Broadcom have expressed non-binding interest to purchase up to $5 billion of the new stock. Meta shares recently traded near $624, roughly 20% below their September peak, marking entry into bear market territory. Nevertheless, 38 of 44 analysts tracked by TipRanks maintain a buy rating on Meta, setting an average target price of $852.31 (roughly 1.4 times current levels), with the lowest target at $580. Defending the strategy, CEO Mark Zuckerberg noted, "Our investments are paying off, the core business is strong, and we're seeing velocity across the board." The market environment reflects broader industry pressures as China AI Stock Crash Erases $480 Billion as US Big Tech Earnings Approach and experts like Ed Yardeni Says AI Bubble Is Deflating Without Bursting as Bond Investors Limit Capital.
Key Takeaways
- $35 billion stock sale launched to finance ongoing AI infrastructure investments.
- Negative $2.12 billion free cash flow in Q3 due to $34.9 billion in equipment spending.
- $80.9 billion long-term debt, up from $58.7 billion at the end of 2025.
- $852.31 average price target across 38 buying analysts despite a $400 billion market cap loss.
Why It Matters
Meta's decision to issue equity despite negative free cash flow illustrates the extreme capital requirements demanded by the ongoing AI infrastructure race. While immediate dilution and heavy capex have pushed the stock into bear market territory down 20%, Wall Street's overwhelming buy ratings signal confidence in Meta's ultimate monetization pipeline. Investors should monitor whether peer earnings across Big Tech reveal similar cash flow compression under rising AI capital burdens.
