Meta (META) shares dropped 7% in extended trading Wednesday after the company beat Wall Street’s revenue target but still gave investors two things they did not like: weaker user growth and capital spending that came in below some expectations for the quarter. The reaction looked harsh on the surface because the headline numbers were not weak. Meta reported $56.31 billion in Q1 2026 revenue, above the $55.45 billion estimate from analysts polled by LSEG. Meta’s adjusted earnings per share came in at $7.32, though that number was listed as not comparable with estimates. The company’s first quarter covered the three months ended March 31, 2026. Revenue rose 33% from $42.31 billion a year earlier. Costs and expenses climbed 35% to $33.44 billion, compared with $24.76 billion in Q1 2025. Meta’s income from operations reached $22.87 billion, up 30% from $17.56 billion. Operating margin stayed flat at 41%, so the business kept the same margin level while spending far more cash. Mark Zuckerberg said: “We had a milestone quarter with strong momentum across our apps and the release of our first model from Meta Superintelligence Labs. We’re on track to deliver personal superintelligence to billions of people.” Meta grows revenue and ad pricing while daily users slip from the prior quarter Meta posted net income of $26.77 billion, up 61% from $16.64 billion last year. Diluted EPS rose 62% to $10.44, versus $6.43 in the year-ago quarter. The tax line did a lot of heavy lifting. The company booked a $5.02 billion income tax benefit, compared with a $1.74 billion tax provision last year. Its effective tax rate was negative 23%, versus 9% a year earlier. Meta marked the comparison as not meaningful. That tax benefit included $8.03 billion recognized in Q1 2026. It partly offset a $15.93 billion non-cash tax charge recorded in Q3 2025 after the One Big Beautiful Bill Act was enacted. The benefit came from U.S. Treasury Notice 2026-7, which dealt with how previously capitalized U.S. research and development costs are treated under the Corporate Alternative Minimum Tax. Without that benefit, Meta said its effective tax rate would have been 37 percentage points higher, and diluted EPS would have been $3.13 lower. User growth was the part that traders punished. Family daily active people averaged 3.56 billion in March 2026, up 4% from the prior year, but down slightly from the previous quarter. Meta said the quarter-over-quarter decline came from internet disruptions in Iran and a restriction on WhatsApp access in Russia. The ad business still expanded. Ad impressions across the Family of Apps rose 19% year over year. The average price per ad increased 12%. Revenue grew 29% on a constant-currency basis, meaning exchange rates added extra force to the reported 33% gain. Meta raises its 2026 AI spending plan as cash flow stays large Meta spent $19.84 billion on capital expenditures in Q1, including principal payments on finance leases. It returned $1.35 billion through dividends and dividend equivalents. Cash, cash equivalents, and marketable securities stood at $81.18 billion as of March 31. Meta’s operating cash flow was $32.23 billion, while free cash flow reached $12.39 billion. Headcount ended the quarter at 77,986, up 1% year over year. The company guided Q2 2026 revenue to $58 billion to $61 billion. It said foreign currency should add about 2 percentage points to year-over-year revenue growth based on current exchange rates. Meta’s full-year 2026 expenses remain projected at $162 billion to $169 billion, unchanged from the prior outlook. Meta still expects 2026 operating income to exceed 2025 operating income. The bigger line was capex. Meta now expects 2026 capital expenditures, including finance lease principal payments, of $125 billion to $145 billion. That is up from the old $115 billion to the $135 billion range. The company pointed to higher component prices this year and extra data center costs tied to future capacity. For the remaining quarters of 2026, Meta expects a tax rate between 13% and 16%, unless the tax landscape changes. It also said legal and regulatory issues remain active in the EU and U.S., including youth-related scrutiny and more U.S. trials scheduled this year that could lead to a material loss. If you want a calmer entry point into DeFi crypto without the usual hype, start with this free video.
