Key Points

• Meta faces a spending cap of $145 billion ahead of its financial report
• Analysts expect quarterly revenue to be around $63.3 billion.
• Options markets account for about 6% of stock price volatility.

Meta Platforms will release its third-quarter financial report on October 21st. Wall Street is paying close attention to this company's substantial artificial intelligence expenditure plan to see if it can lead to stronger profits, rather than just higher infrastructure costs. This will be a major test of investors' confidence.

The company expects that capital expenditures in 2026 will range between $130 billion and $145 billion, including payments on the principal of financial leases. Meanwhile, analysts predict revenue for the third quarter to be around $63.3 billion, which once again brings into focus the advertising performance of Meta and the return on investment of AI.

Option traders expect that after the financial report is released, the stock price of META may fluctuate by about 6%, which is equivalent to a range of about $42 above or below the closing price of $709.33 from last Friday. What is reflected here is the implied volatility of the market, and it does not indicate in which direction the stock price will move.

Meta $145 billion AI Investment Faces Its Next Test

According to the latest financial report of Meta, the company's management has lowered its forecast for annual capital expenditures and narrowed it to between $130 billion and $145 billion, which is a adjustment from the previous range of $125 billion to $145 billion.

This portion of expenditure covers the AI infrastructure as well as the existing business of Meta, including data centers, servers, network equipment, and financial leasing. It is not entirely attributed to any one AI model or a single product.

Meta announced second-quarter revenue of $60.8 billion, a year-on-year increase of 28%; during the same period, capital expenditures reached $31.1 billion, and free cash flow decreased to approximately $784 million.

This kind of tension has previously led to sell-offs after financial reports against the backdrop of strong advertising growth.

Investors will now observe whether higher advertising revenue, operating profit margins, and cash generation capabilities can offset the continuously rising costs of depreciation, infrastructure, and personnel.

Wall Street expects revenue to reach $63 billion, while AI costs continue to rise.

Analysts expect that Meta's revenue in the third quarter will reach approximately $63.3 billion, a year-on-year increase of about 24%.

This will bring revenue close to the upper end of the guidance range of $61 billion to $64 billion given by management, although the actual result will not be revealed until Wednesday.

The continuously expanding AI business of Meta may ultimately enhance its core advertising business through better recommendation systems, targeted advertising placement, and automated advertising campaign tools.

Its Muse AI assistant also presents another potential business opportunity, however, there are still doubts regarding its monetization capability and the costs associated with operating increasingly complex models.

Meta launched Muse Wonder and Muse Wonder Full on October 14th, further intensifying the competition with OpenAI and Anthropic ahead of the financial report release.

The key question is how much of the infrastructure expenditure of Meta can bring lasting returns. Coinpaper previously discussed this issue in a guide on the investment returns of AI.

Meta Why do financial reports matter more than just the META stock price?

On the occasion of the performance announcement of Meta, the market is re-evaluating the investment boom in AI on a broader scale.

Tech stocks are under pressure as investors question whether the construction of data centers and expensive computing hardware will ultimately generate sufficient cash flows.

Coinpaper has also recently analyzed the infrastructure costs of AI, including how expenditures first flow to semiconductor manufacturers, construction companies, and power suppliers, while technology companies may not necessarily receive immediate returns.

Meta is also exploring the sale of excess computing power, which could create another source of income for its infrastructure investments. However, this business is still in the development stage and not yet a mature profit source.

For investors, on October 21st, what is of concern is not only whether Meta will exceed quarterly expectations. The more significant question is whether management can demonstrate that their accelerated advancement of AI investments will enhance profitability and future cash flows.