Meta Platforms Inc. shocked Wall Street on Wednesday by announcing that its capital expenditures for 2026 could reach $145 billion, a figure that dwarfs the $72 billion it spent in 2025. The news came despite a strong quarterly earnings report that showed revenue surging 33% year-over-year—the fastest growth since 2021. Shares fell more than 7% in after-hours trading as investors reacted to the stunning spending forecast.
The eye-popping number represents a $10 billion increase from previous expectations, and CEO Mark Zuckerberg attributed most of the overrun to soaring component costs, particularly memory chips. The global AI boom has triggered an unprecedented data center buildout, creating a worldwide memory shortage that has driven up prices for the high-bandwidth memory chips essential for training and running large language models.
Meta's massive bet comes as it scrambles to catch up with rivals like Google and Microsoft in the artificial intelligence race. Roughly ten months ago, Zuckerberg acknowledged that the company had fallen behind and announced a major catch-up effort. Since then, Meta has poured billions into research and development, poached top talent from across the industry, and established a new division called Meta Superintelligence Labs, led by Scale AI founder Alexandr Wang.
The company's first major AI release under this new division was the Muse Spark model, a proprietary open-source model that debuted earlier this month. In an earnings call, Zuckerberg called the release a sign that Meta's R&D is on track. He also promised two new AI agents: one for personal use and one for business applications. Already, the company is testing early versions of business AIs, with weekly conversations growing tenfold since the start of the year.
Internally, AI is driving significant changes at Meta. The company announced it will lay off 10% of its workforce and offer voluntary buyouts to 7% of its U.S. staff. CFO Susan Li said a 'leaner operating model' would help offset the substantial investments.
However, skepticism remains high. Meta's previous big bet on the metaverse, through its Reality Labs division, has resulted in over $80 billion in losses over six years. In the latest quarter, Reality Labs posted an operating loss of $4 billion on just $402 million in sales. Many experts point to this track record as a reason for caution regarding the AI investment. Still, the potential payoff of AI is enormous. Meta already uses AI to translate and dub videos for over 500 million weekly users on Facebook and Instagram, and it is integrating the new model into its ad recommendation system to hyper-personalize feeds.
The global memory crisis triggered by AI data center construction is also affecting consumer electronics, driving up prices for laptops and smartphones. Zuckerberg defended the spending spree, saying he is confident in the investment and that it will enable Meta to develop more novel products. But with shares sliding and the market skeptical, Meta faces an uphill battle to prove that its AI gamble will pay off. The next few quarters will be critical as the company rolls out its agents and further integrates AI into its core products.
Meta's aggressive push into AI mirrors a broader trend in Silicon Valley, where companies are racing to secure compute power and talent. Amazon, Google, and Microsoft also reported earnings on the same day, but Meta's spending plans stood out as the most aggressive. Analysts note that while Meta's revenue growth is strong, the company's profit margins could be squeezed as capital expenditures mount. The key question remains whether the AI investment will generate sufficient returns to justify the cost, especially given Meta's history of expensive bets that have yet to pay off.
For now, Zuckerberg and his team are betting that AI will transform not only Meta's products but also its internal operations, automating tasks and making the company more efficient. The layoffs and buyout offers are part of that efficiency drive. As Meta continues to spend heavily on data centers, memory chips, and AI research, the tech world will be watching closely to see if this massive bet finally puts the company back at the forefront of innovation.
Source: Gizmodo News