Key Takeaways
- Meta shares plummeted over 10% following Q1 2026 results, erasing approximately $175 billion in market value
- The company posted $56.31 billion in revenue, marking a 33% year-over-year increase — its best quarterly performance since 2021
- Capital expenditure forecast for 2026 was increased to a range of $125–$145 billion, exceeding the previous $115–$135 billion guidance
- JPMorgan shifted its stance on META from Overweight to Neutral, reducing the price objective from $825 to $725
- Platform users totaled 3.56 billion daily actives, falling short of analyst projections of 3.62 billion
Meta Platforms delivered impressive financial results on April 29, 2026, yet shares tumbled more than 10% in the following session. META traded near $610 at time of writing, representing a significant decline from pre-earnings levels above $700.
The social media giant generated $56.31 billion in quarterly revenue, representing a 33% year-over-year jump. This marks the company’s most robust quarterly expansion since 2021. The firm reported net income of $26.8 billion, translating to $10.44 per diluted share, although this metric incorporated an $8.03 billion one-time tax advantage related to U.S. Treasury R&D guidance adjustments.
Excluding that favorable tax impact, the earnings results remain impressive — though considerably less spectacular than the headline figure suggests.
Advertising impressions climbed 19% compared to the prior year. More than 4 million advertisers now utilize at least one of Meta’s generative AI creative tools. The company’s Family daily active people metric hit 3.56 billion, falling short of the Street’s 3.62 billion consensus.
Meta pointed to internet service interruptions in Iran and regulatory restrictions on WhatsApp in Russia as contributing factors to the user shortfall.
JPMorgan Abandons Bullish Stance
The development that most spooked investors wasn’t the minor user miss — it was JPMorgan’s dramatic reversal.
Analyst Doug Anmuth, who had been among the most vocal supporters of Meta on Wall Street, shifted his rating to Neutral from Overweight and slashed his price objective to $725 from $825 on April 30.
The catalyst was Meta’s revised capital spending outlook. Management lifted its full-year capex projection to $125–$145 billion, representing an increase from the prior $115–$135 billion range. This marks the second straight upward adjustment. Meta’s initial 2026 capex forecast, issued in January, stood at $115–$135 billion.
First-quarter capex reached $19.8 billion, jumping 47% year-over-year. CFO Susan Li cited elevated memory-chip pricing and expanded data center investments as primary cost drivers.
Anmuth’s apprehension doesn’t stem from the expenditure magnitude itself. Rather, it’s the uncertain return profile. “We believe full-stack AI competition is intensifying and Meta has a more challenging path to returns on heavy AI capex beyond advertising,” he stated.
He forecasts Meta’s capex will balloon to $202 billion in 2027, producing negative free cash flow of $4 billion in 2026 and $24 billion in 2027.
Capital Allocation Strategy
Meta’s artificial intelligence initiatives focus on proprietary large language models, data center expansion, and the recently unveiled Muse Spark model — the inaugural release from its superintelligence research division.
Daily engagement with Meta AI glasses tripled year-over-year during Q1. The Reality Labs segment recorded a $4.03 billion operating deficit for the period.
Anmuth recognized Muse Spark as “the first step towards Meta’s goal of pushing the frontier and delivering personal superintelligence to billions of users,” but emphasized that the monetization pathway from this investment to non-advertising revenue streams remains ambiguous.
Most competing analysts declined to follow JPMorgan’s downgrade. Barclays, Cantor Fitzgerald, and TD Cowen all reduced price objectives while preserving bullish recommendations.
Anmuth also identified two immediate challenges for Q2: more difficult year-over-year revenue comparisons and the implementation of European Limited Privacy Advertisements, anticipated to create revenue pressure beginning in the second quarter.
JPMorgan’s revised $725 price target suggests approximately 8% potential upside from present trading levels.
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