U.S. tech giant Meta Platforms unveiled its Q1 2026 earnings after the market close on April 29, delivering a report of soaring revenue but growing investor anxiety. Despite impressive top-line and bottom-line growth, the company’s massive artificial intelligence infrastructure spending plan triggered a selloff, with shares plummeting over 6% in after-hours trading.

Fastest Revenue Growth Since 2021

According to the earnings report, Meta’s total revenue reached $42.3 billion in the first quarter, a 33% year-over-year increase — the fastest growth rate since 2021. Net income surged to $26.8 billion, well ahead of Wall Street estimates.

This robust performance was primarily driven by a sustained recovery in the advertising business and improved conversion rates powered by AI-driven ad recommendation systems. Meta CFO Susan Li said on the earnings call: “AI is improving our ad efficiency, user engagement, and content recommendation quality across the board.”

AI Spending Plan Sparks Market Panic

However, what truly rattled investor sentiment was Meta’s dramatic upward revision of its full-year capital expenditure guidance. The company raised its 2026 AI-related capex forecast to between $125 billion and $145 billion — a record high for the tech industry.

This figure means Meta’s AI infrastructure spending alone rivals the annual revenue of many mid-sized tech companies. For comparison, this expenditure exceeds the annual defense budgets of most nations.

Investors widely worry that such enormous spending could erode long-term profit margins. The Financial Times reported that Meta shares fell more than 6% in after-hours trading, reflecting market unease with the company’s “cash-burning” strategy.

Mass Layoffs Alongside Massive Investment

Notably, Meta is preparing for a new round of large-scale layoffs even as it reports record profits. According to Variety, the company is gearing up for “mass layoffs,” creating a stark contrast with its unprecedented AI investments.

This strategy reflects CEO Mark Zuckerberg’s clear calculus: AI infrastructure is central to the company’s future competitiveness, while traditional workforce allocations require ongoing optimization.

Wall Street Deeply Divided

Wall Street remains sharply divided on Meta’s AI investment strategy. Some analysts believe AI spending will yield significant returns in coming years, particularly in personalized advertising, the metaverse, and AI assistants. Others warn that such aggressive expenditure faces the risk of an unacceptably long payback period.

As the AI arms race among tech giants intensifies, Meta’s earnings report reaffirms a stark reality: in the age of artificial intelligence, falling behind is not an option — but the cost of staying ahead is climbing at a staggering pace.

Source: Yahoo Finance | CNBC | Variety | Financial Times