Meta’s stock dropped after the company raised its capital spending forecast and warned that growing legal scrutiny over youth safety could lead to a “material loss.”
This has made investors more concerned that Meta’s push into AI could be more expensive than expected.
Meta increased its 2026 capital expenditure forecast to between $125 billion and $145 billion, up from the previous range of $115 billion to $135 billion. After the announcement, the stock fell more than 6% in after-hours trading.
AI ambitions are getting more expensive
The new spending plan shows that Meta is investing even more in artificial intelligence infrastructure, even as investors become more cautious about how much big tech companies are spending to stay ahead.
Reuters said the higher forecast means Meta plans to spend billions more on AI, and investors were uneasy about the bigger price tag. The fact that Meta kept its overall 2026 expense forecast the same, despite higher capital spending, suggests the company plans to cut costs in other areas.
Meta’s first-quarter revenue was $56.31 billion, beating the average analyst estimate of $55.45 billion. The company expects second-quarter revenue between $58 billion and $61 billion, which is about what the market expected.
However, these results were overshadowed by stronger growth from other big tech companies, especially Google’s parent company, Alphabet. Analyst Gil Luria from D.A. Davidson told Reuters that Meta’s results “met expectations, but failed to impress investors,” especially since Google’s numbers were better and Meta’s spending increased without cutting operating costs.
Legal scrutiny is adding another layer of risk
The drop in Meta’s stock was not just about AI spending.
MSN shared that Meta also warned that legal and regulatory challenges in the European Union and the United States could significantly impact our business and financial results after years of criticism about children’s safety on social media.
The company said it is still under scrutiny for “youth-related issues” and has more U.S. trials planned this year that “may ultimately result in a material loss.”
Meta is dealing with more teen social-media bans worldwide, as well as thousands of lawsuits from individuals, cities, states, and school districts who claim the company’s platforms are addictive and harmful to children.
The publication also mentioned several big cases coming up, including the next phase of a New Mexico trial and a California case that could set the tone for nearly 2,000 similar lawsuits from U.S. school districts.
Zuckerberg’s AI overhaul is also reshaping the workforce
The higher spending comes as CEO Mark Zuckerberg keeps reorganizing the company to focus on AI. Meta’s results were released just weeks after the company’s plans for major layoffs were first reported. Chief Financial Officer Susan Li confirmed layoffs in May during the conference call after the results.
Li said, “We don’t really know what the optimal size of a company will be in the future,” and added, “there’s a lot of change right now, with AI capabilities advancing rapidly.”
Reuters also reported that Zuckerberg said small teams have used AI to create products that used to take dozens of people months to build. He wants to shape “the next evolution of our company around these people” by investing in top infrastructure, rewarding top performers, and “streamlining teams so they aren’t bigger than they need to be.”
Meta said it had 77,986 employees at the end of March, which is 1% more than a year ago but slightly less than the 78,865 at the end of December.
Investors are now weighing growth against risk
For Meta, the main challenge now is not just whether it can keep spending heavily on AI, but whether investors will remain patient as costs and legal risks grow.
Matt Britzman from Hargreaves Lansdown, who said the higher capital spending number worried the markets, though he believes some of the increase is due to more expensive memory, not a big change in Meta’s investment plans.
Still, the market’s reaction shows that investors see Meta’s AI expansion and legal risks as a more complex situation than just a simple growth story.
