By Martin Baccardax

Meta Platforms shares extended their post earnings slump in early Friday trading, dragging the Facebook parent into a mini-bear market decline that echoes larger concerns over artificial intelligence spending.

Meta shares have also fallen more than 20% on an intraday basis since last Wednesday, when the company posted a mixed set of third-quarter earnings. It officially entered bear market territory earlier this week.

Operationally, Meta appeared to be firing on all cylinders: its much-maligned Reality Labs division saw a 270% increase in revenue, although it still booked a $4.4 billion loss.

Overall ad revenue were up 26% from last year, coming in a record $50.1 billion, while metrics measuring time spent on Facebook, Instagram and Threads were all notably higher.

But so was its AI spending.

Meta shelled out $18.8 billion over the three months ending in September, more than double the tally for the same period last year, and told investors to expect a full-year figure as high as $72 billion.

The group closed its biggest corporate bond issue on record last month, raising around $30 billion, and reached a structured deal with private-equity investors to raise another $27 billion for an AI data center in Louisiana through a special-purpose vehicle called Beignet Investor LLC.

Meta's overall expenses are on the rise, too, as it brings in high-paid talent to develop its AI ambitions, which CEO Mark Zuckerberg has dubbed 'Super Intelligence.'

That's going to pressure profit margins, and cash flows as well, into the coming year, although Gimme Credit analyst Dave Novosel notes that the group's overall leverage remains low and its 2026 share buybacks shouldn't be affected.

Market reaction, however, has been brutal. Meta's seven-day decline of around 20% is nearly four times more than that of the Nasdaq benchmark, and more than three times the pullback of CNBC's Magnificent Seven stock index.

Josh Brown of Ritholtz Wealth Management said this likely means investors are "asking questions and reacting negatively when they don't believe in what the company is saying it's going to do."

"I think that's really healthy," he told CNBC Friday. "In a true bubble you don't have some of the more important companies in the theme in a 24% drawdown."

Meta's slump could reflect the fact that while Meta is spending like a hyperscaler, meaning its AI investments are similar in scale to that of Google parent Alphabet, Microsoft and Amazon, it doesn't generate revenue or profit from outside clients when it does.

Meta's investments are almost entirely focused on how it can improve and enhance it existing business. That makes it feel more like a regular tech company and less like one of the commercial cloud groups, chip makers and cybersecurity companies at the heart of the AI boom.

And Jason Helfstein, head of internet research at Oppenheimer, thinks investors are still unclear as to how Meta's huge increases in spending will flow through into its earnings, which remain dependent on advertising sales.

And they also remember Zuckerberg's Metaverse ambitions, which have amounted to more than $70 billion in losses over the past five years.

"The Metaverse was a project a lot of investors never really understood, " Helfstein told CNBC following the group's earnings last week. "I think investors do understand the return on AI, but (spending) is at such a level for projects that don't reflect the current business."

Meta, he said, is likely to see earnings growth of just 3% next year, compared with around 25% for Google.

He also hinted that Meta could reassess its spending commitment if investors were to take the stock "15% or 20% lower" from its pre-earnings levels.

With the stock now trading near the lowest since early May, and up just over 1% for the year, investors will watch Meta's final decisions on spending closely over the coming weeks.

Write to Martin Baccardax at martin.baccardax@barrons.com

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November 07, 2025 13:17 ET (18:17 GMT)

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