Shares of Meta (META) fell 7% in extended trading Wednesday after the company hit Wall Street’s revenue target but still gave investors two things they didn’t like: weak user growth and capital spending that came in below some expectations for the quarter.
The reaction seemed harsh on the surface because the headline numbers were not weak. Meta reported $56.31 billion in revenue for the first quarter of 2026, above the $55.45 billion estimate of analysts polled by LSEG.
Meta’s adjusted EPS was $7.32, although that number was listed as not comparable to estimates.
The company’s first quarter covered the three months ending March 31, 2026. Revenue rose 33% from $42.31 billion a year earlier. Costs and expenses rose by 35% to $33.44 billion, compared to $24.76 billion in the first quarter of 2025.
Meta’s income from operations reached $22.87 billion, up 30% from $17.56 billion. Operating margin remained steady at 41%, so the company maintained the same margin level while spending more money. Mark Zuckerberg said:
“We had an important quarter that saw strong momentum across our applications and the release of our first model from Meta Superintelligence Labs. We’re on track to deliver personal superintelligence to billions of people.”
Meta is increasing revenue and ad rates while the number of daily users is down from the previous quarter
Meta reported net income of $26.77 billion, up 61% from $16.64 billion last year. Diluted earnings per share rose 62% to $10.44, compared to $6.43 in the same quarter last year. The tax line has done a lot of the heavy lifting.
The company received an income tax benefit of $5.02 billion, compared to a tax allowance of $1.74 billion last year. The effective tax rate was negative 23%, compared to 9% the previous year. Meta put the comparison as meaningless.
These tax benefits included $8.03 billion recognized in the first quarter of 2026. They partially offset a $15.93 billion non-cash tax charge recognized in the third quarter of 2025 following the enactment of the One Big Beautiful Bill Act.
The benefit came from US Treasury Notice 2026-7, which addressed how previously capitalized research and development costs in the US would be treated under the alternative minimum corporate tax. And without that benefit dead The effective tax rate would have been 37 percentage points higher, and diluted earnings per share would have been $3.13 lower, he said.
User growth was the part that traders were punished for. The average number of daily active people in a household was 3.56 billion in March 2026, up 4% from the previous year, but down slightly from the previous quarter. Meta said that the decrease on a quarterly basis was due to the internet outage in Iran and restrictions on access to the WhatsApp application in Russia.
The advertising business is still expanding. Ad impressions across the app family rose 19% year over year. The average price per ad increased by 12%. Revenue grew 29% on a constant currency basis, meaning exchange rates added additional strength to the reported 33% gain.
Meta raises its AI spending plan for 2026 as cash flow remains significant
Meta spent $19.84 billion on capital expenditures in the first quarter, including milestone payments on finance leases. It returned $1.35 billion through dividends and dividend equivalents. Cash, cash equivalents and marketable securities amounted to $81.18 billion as of March 31.
Meta’s operating cash flow reached $32.23 billion, while its free cash flow reached $12.39 billion. Headcount ended the quarter at 77,986, up 1% year over year.
The company directed revenues for the second quarter of 2026 at $58 billion to $61 billion. Foreign currencies should add about 2 percentage points to year-over-year revenue growth based on current exchange rates, she said.
Meta’s full-year 2026 expenses remain expected at $162 billion to $169 billion, unchanged from previous forecasts. Meta still expects 2026 operating income to exceed 2025 operating income.
The biggest line was capital expenditures. Meta now expects 2026 capital expenditures, including finance lease principal payments, to range from $125 billion to $145 billion. This represents an increase from the old range of $115 billion to the $135 billion range. The company pointed to higher component prices this year and additional data center costs associated with future capacity. For the remaining quarters of 2026, Meta expects a tax rate between 13% and 16%, unless the tax landscape changes.
It is too He said Legal and regulatory issues remain active in the EU and US, including youth-related scrutiny and further US trials scheduled this year that could result in a material loss.
