Key Highlights

● Meta fell 1.05% to $634.65 as internet giants lagged the chip rally.

● Meta's president warned political opposition could make new data centers harder to build.

● Third-quarter Revenue rose 26% to $64.60 billion, but the Operating Margin fell to 20%.

● Meta plans 2026 Capital spending of $135 billion to $145 billion on AI infrastructure.

Why did Meta Platforms (NASDAQ:META) fall on a day when the Nasdaq rallied? The Social Media giant faced fresh questions about how quickly it can build the data centers its AI plans depend on, and big-cap internet names generally lagged the chip-led rally. Meta fell 1.05% to $634.65 during the session, on 4.22 million shares. That ranked it twelfth among U.S. stocks by dollar volume, a reflection of its size more than any unusual surge in trading.

Data center politics and a split market

The main company-specific headline came from Meta's own warning about the political climate after the U.S. midterm elections. Meta President Dina Powell McCormick said at the WSJ Tech Conference that "political opposition and increased regulatory scrutiny" could make building new data centers harder. Newly elected officials are reportedly pushing for stricter local rules and even moratoriums, driven by concerns about power use, water consumption and environmental effects on local communities. Powell McCormick suggested that expanding existing sites may be easier than getting approval for new ones, and said Meta is exploring international locations to spread out its infrastructure.

That matters because Meta is spending heavily on AI computing capacity, including for its Muse AI agents. Any delay in securing land, permits or power could slow the payoff from that spending.

The wider market added pressure. CoreWeave's strong quarter sent chip stocks sharply higher, with the Philadelphia Semiconductor index up 5.66%. Megacap platform companies went the other way: the same report listed Meta, Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) as decliners. No single cause was named for Meta's drop. Instead, coverage pointed to ongoing investor concern about AI spending and the large legal charge in Meta's most recent quarter. Other recent news was mixed. JPMorgan named Meta its preferred internet stock, and the company said infrastructure chief Santosh Janardhan plans to leave in early 2027, with former AWS executive David Brown set to succeed him.

What Meta does

Meta owns Facebook, Instagram, WhatsApp, Messenger and Threads, a group it calls the Family of Apps, which reaches 3.64 billion daily active people. Nearly all of its revenue comes from Advertising across those apps. It also runs Reality Labs, the division behind its virtual reality headsets and smart glasses, which loses billions of dollars a year. AI is now central to the company's strategy, both to improve ad targeting and through new products such as Muse. More than 10 million people set up a Muse agent within about six weeks, with shopping the most common use.

Strong ads, heavy costs

Meta's third-quarter results, reported Oct. 22, showed a healthy ad Business weighed down by costs. Revenue rose 26% to $64.60 billion, ahead of expectations. Advertising revenue was $63.06 billion, as ad impressions rose 10% and the average price per ad rose 14%.

Profit was a different story. Diluted EPS was $3.83, including a one-time $9.89 billion legal charge tied to an agreement with 52 U.S. state attorneys general. Excluding the charge, EPS would have been $7.40. Total costs and expenses jumped 68% to $51.61 billion, and the operating margin fell to 20% from 40%. Capital spending reached $34.91 billion in the quarter, and free Cash Flow was negative $2.12 billion.

For the fourth quarter, Meta guided to revenue of $73 billion to $76 billion. It raised its 2026 expense outlook to $175 billion to $179 billion and expects full-year capital spending of $135 billion to $145 billion for AI infrastructure and data centers. Reality Labs is expected to lose $18 billion to $19 billion this year, narrowing to about $15 billion in 2027. Meta has also announced a 2-for-1 Stock Split through a new class of nonvoting shares, with trading in the new shares expected in late January 2027.

Valuation versus peers

Meta trades at about 21.6 times trailing earnings. That is nearly the same as Amazon's 21.5, well below Microsoft's 27.1 and Apple (NASDAQ:AAPL)'s 39.4, and above Alphabet (NASDAQ:GOOGL)'s 15.2. Meta's forward multiple is about 18 times 2027 consensus earnings. The stock has trailed the market. Meta was down 2.6% for the year against a roughly 10% gain for the S&P 500. Wall Street remains largely positive. Consensus is a "Strong Buy" rating with a mean price target of $858.25, while 62 analysts have an average target of about $850.

Bull and bear cases

Bulls see a core business that is still growing fast. Revenue is rising more than 25% a year, ad pricing and volumes are both increasing, and the user base is huge. Muse gives Meta a possible new source of commerce revenue. The valuation is modest next to other megacaps, and the planned split could draw interest from individual investors.

Bears focus on spending and legal risk. Capital spending of up to $145 billion this year has pushed free cash flow below zero, and investors expect more detail on 2027 spending plans on the next Earnings call. If 2027 capital spending rises again without matching revenue growth, the Investment case would weaken. Debt of about $83.7 billion now sits slightly above cash of $82.4 billion. Analysts cut 2026 EPS estimates 40 times in the past 30 days, against seven increases. Several youth-related trials are pending, and another charge the size of the third-quarter settlement would hurt. Reality Labs continues to lose large sums. Now political resistance to new data centers adds a risk to the timing of Meta's AI build-out.

Capex Detail and the January Split

The key event is Meta's fourth-quarter report, where management is expected to give more detail on 2027 capacity and spending. Investors will also watch for progress on Data Center approvals, including whether Meta shifts more construction overseas, along with Muse engagement and commerce fees, the January share split, and developments in pending youth-safety litigation. For now, Wednesday's decline shows a market that likes Meta's ad engine but is growing more cautious about the cost and pace of its AI ambitions.