Meta reported strong revenue growth in its latest quarter but also signalled a major rise in spending next year as it builds more capacity for artificial intelligence. The company told investors that total expenses will rise sharply in 2026 and that capital spending will be notably larger than in 2025. The market reacted by selling shares after the guidance.
Spending and guidance
Meta said that next year it will expand its data centre footprint and buy more compute to support its AI roadmap. The company said it will both build its own infrastructure and contract third-party cloud services to meet rising compute needs. Management explained that the aim is to avoid being under-provisioned for AI workloads. The company increased its capital expenditure projections in 2025 and indicated that the provision of 2026 referred to even bigger capital expenditures. The finance department was saying it plainly. The firm is out of an era of heavy investment in itself in a phase of even heavier investment.
The boost in spending comes even as Meta recorded solid sales in the quarter. The company is using profits from its advertising business to fund the build-out. Management said the new capacity will support advances in generative AI and related products. The approach is to front-load infrastructure now so that the company has industry-leading compute as demand grows. That strategy helps explain why Meta is prepared to accept lower near-term profit margins in exchange for long-term scale.
Market reaction and risks
Investors sold shares soon after management gave the guidance. The stock fell meaningfully in after-hours trading as sentiment shifted from optimism about revenue to concern about higher costs. Analysts noted the tension between aggressive infrastructure spending and investor expectations for returns. The larger expense plan raises several risks. If AI features do not generate the expected revenue lift, margins could compress further. If hardware costs rise or if third-party capacity is constrained, the company may need to push spending higher. That would lengthen the time it takes for investors to see a clear payoff.
Reality Labs outlook
Meta also provided updates on its hardware and consumer AI products. According to Bloomberg, the Reality Labs division continues to show heavy losses as the company invests in headsets and new hardware. The unit reported a wide operating loss in the quarter, while sales remain modest by comparison. Management said the company expects some product mix shifts in the near term and that retail demand patterns may change seasonally. The business is strategic for Meta because it ties users into immersive experiences that can be paired with AI features. That strategic value is why leadership is willing to accept current losses to reach future scale.