Meta Platforms (META) shares have dropped approximately 10% over the past week following the company’s first-quarter 2026 update, primarily due to a significant increase in capital expenditures. The revised forecast for capital expenditures now ranges from $125 billion to $145 billion, up from a previous estimate of $115 billion to $135 billion. CEO Mark Zuckerberg cited rising component costs, particularly in memory pricing, as a key driver of this increase. While the company reported robust first-quarter revenue growth of 33% year over year, concerns linger over a projected deceleration in revenue growth.
The second-quarter revenue guidance of $58 billion to $61 billion implies a reduction in constant-currency growth to around 23%, down from 29% in the first quarter. This shift raises questions about the sustainability of Meta’s growth amid rising costs and potential advertising demand uncertainties.
For market professionals, the key takeaway is that while Meta’s strong earnings may suggest resilience, the elevated capital expenditure and slowing revenue growth could challenge long-term valuation justifications, especially given the stock’s current forward P/E ratio of 20.
Source: fool.com