# Why Meta Stock Fell 7% Despite Record Revenue and a Stock Split

- URL: https://usa-24.com/why-did-meta-stock-fall/
- Publisher: USA 24
- Section: Tech News & Analysis
- Published: 2026-10-23T01:02:21.636Z
- Updated: 2026-10-23T01:02:21.652Z
- Topics: Meta Platforms, Stock Market, AI Spending, Free Cash Flow, Q3 2026 Earnings

> Meta's shares fell about 7% on October 22 despite a revenue beat, as $34.9 billion in quarterly capex pushed free cash flow negative for the first time since its 2012 listing.

## Key takeaways

- Meta shares fell about 7% on October 22, 2026, to roughly $650, even though quarterly revenue of $64.6 billion beat forecasts.
- Capital expenditures of $34.9 billion pushed free cash flow to negative $2.1 billion, the first negative quarter since Meta listed in 2012.
- A $9.89 billion litigation charge cut GAAP earnings per share to $3.83, compared with about $7.40 excluding the charge.
- Meta plans to issue a new non-voting Class C stock to existing shareholders, which works out to a 2-for-1 split, with trading expected in late January 2027.
- The Nasdaq Composite fell 2.6% on the same day, with chip stocks leading the decline.

Meta stock fell about 7% on Thursday, October 22, 2026, to roughly $650, one day after the company reported third-quarter revenue that beat Wall Street's forecasts. The sell-off was not really about sales. It was about cash. Meta's spending on AI infrastructure pushed free cash flow negative for the first time since the company listed in 2012, and investors reacted to what that means for the next few years.

## Why did Meta stock fall after a revenue beat

Meta reported $64.6 billion in revenue, up 26% from a year earlier and above the roughly $63.3 billion analysts expected. The company's [Form 10-Q filed with the SEC](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066773/meta-20260930.htm) is the most reliable place to check that figure, since some early reports rounded it to $64 billion. Ad impressions rose 10% and the average price per ad rose 14%, which shows the core advertising business is still growing quickly.

Those numbers did not protect the stock. The Nasdaq Composite fell 2.6% on Thursday and the S&P 500 fell 1.2%, with chip stocks leading the decline, according to [Reuters via Yahoo Finance](https://finance.yahoo.com/markets/stocks/articles/nasdaq-futures-drop-over-1-093849296.html). Meta's slide added to the pressure, and the Nasdaq posted its steepest drop since early June. A 7% move in a company this large pulls on every index that holds it.

Fourth-quarter revenue guidance of $73 billion to $76 billion landed around the roughly $73.75 billion analysts had expected, according to [Fortune](https://fortune.com/2026/10/21/meta-q3-earnings-mark-zuckerberg-capex-muse/). Guidance alone did not drive the sell-off. Investors focused on what the company was spending to get there.

## Capital spending turned free cash flow negative

Capital expenditures reached $34.9 billion in the third quarter, roughly 80% above the year-earlier level. Operating cash flow was $32.8 billion, which left free cash flow at negative $2.1 billion. A year earlier, free cash flow was about $10.6 billion, according to [Pomegra](https://pomegra.io/news/nasdaq-meta-stock-falls-7-as-ai-capex-drains-cash) and the [Motley Fool earnings call transcript](https://www.fool.com/earnings/call-transcripts/2026/10/21/meta-meta-q3-2026-earnings-call-transcript/).

Meta's own figures and outside coverage describe the result as the first negative quarter since the company went public in 2012. That detail made the sell-off stick, because it turns an investment story into a funding question. A company that spends more than it generates has to borrow, lease or sell shares to close the gap.

Full-year 2026 capex guidance is $135 billion to $145 billion, with the floor raised from $130 billion. Investors heard that as more spending ahead, not less. Analysts mostly raised their price targets after the report, but several warned about 2027 capital spending, according to [Benzinga](https://www.benzinga.com/analyst-stock-ratings/price-target/26/10/62543931/meta-analysts-revise-price-target-after-q3-core-ad-strength-muse-concerns-remain).

On the call, Mark Zuckerberg argued that the spending would pay back through commerce. As Fortune quoted him: "The average revenue per American user for our existing 'family of apps' users is several hundreds of dollars annually, and we expect Muse will reach an even higher level over time due to the amount of commerce that we already see taking place."

## How the $9.89 billion settlement charge hit profit

Operating income fell 37% to about $13 billion. Most of that drop came from a $9.89 billion litigation charge tied to an August 2026 settlement with multistate attorneys general over teen mental health claims, according to [AOL/Yahoo Finance](https://www.aol.com/articles/meta-stock-drops-more-6-151218000.html) and the Motley Fool transcript. GAAP earnings per share came in at $3.83, compared with about $7.40 excluding the charge.

The settlement agreement provides for payments of up to roughly $18.59 billion, but the timing is not confirmed. Meta did not say when the full amount would show up in its results. That leaves investors guessing about future cash outflows on top of the capex bill.

Legal exposure is piling up. Meta faces a separate $25 billion penalty in New Mexico over Facebook privacy claims, as [USA 24 reported](https://usa-24.com/meta-new-mexico-25-billion-penalty/). Headcount also fell to about 66,775 as of September 30, 2026, down 15% from a year earlier, according to the Motley Fool transcript. The cost cuts show discipline in staffing, but the cash problem is driven by infrastructure.

## The Class C stock split and the equity raise question

Meta also said it will issue a new non-voting Class C stock to existing shareholders. The distribution works out to a 2-for-1 split, and Class C shares are expected to begin trading in late January 2027, according to [Forbes](https://www.forbes.com/sites/antoniopequenoiv/2026/10/21/meta-posts-64-billion-in-revenue-and-announces-stock-split-in-q3-earnings/) and [Vested Finance](https://vestedfinance.com/blog/us-stocks/meta-q3-earnings-2026/). USA 24 has covered the capex floor and the Class C news separately.

The dual-class structure matters here. Zuckerberg keeps voting control while the company raises capital for AI, pays employee stock compensation and funds acquisitions. A split changes the number of shares, not the cash picture, which is why many investors saw the headline as an answer to a question nobody was asking.

The bigger question is whether Meta will sell equity. Analysts flagged the company's suggestion that an equity raise may be needed to fund its plans, according to [Benzinga](https://www.benzinga.com/analyst-stock-ratings/price-target/26/10/62543931/meta-analysts-revise-price-target-after-q3-core-ad-strength-muse-concerns-remain). Meta has not confirmed whether it will sell shares or on what terms.

## Tesla, chip stocks and the broader AI-spending selloff

Meta was not the only major name hit. Tesla fell about 3% on Thursday after its own earnings beat, and SpaceX gave back most of Wednesday's post-earnings gain, according to [Yahoo Finance's live market coverage](https://finance.yahoo.com/markets/live/stock-market-today-thursday-october-22-dow-sp-500-nasdaq-tesla-meta-112217857.html). For background on the Tesla and SpaceX side, see [USA 24's report on the merger committees Musk confirmed](https://usa-24.com/tesla-spacex-merger-special-committees/).

The wider pattern is a repricing of AI spending. Chip stocks, neoclouds such as CoreWeave and AI power suppliers all fell on Thursday over concerns about the cost of data center expansion. Some coverage also cites Iran-related geopolitical headlines and oil prices as contributors, so the cause of the broad selloff is still debated.

The same question hangs over private AI companies. USA 24 reported that [Anthropic's Q3 revenue reportedly hit $16.8 billion](https://usa-24.com/anthropic-ipo-q3-revenue-valuation/) before its IPO, and investors will compare that growth with the spending plans of companies like Meta.

For US investors, the exposure is wider than one stock. Index funds and retirement accounts that hold Meta, Nvidia, Microsoft and Alphabet all moved with a session in which the tech sector led the market lower, according to [Reuters via Yahoo Finance](https://finance.yahoo.com/markets/stocks/articles/nasdaq-futures-drop-over-1-093849296.html).

## What investors can check before acting

- Read Meta's Q3 10-Q on SEC EDGAR for capex, cash flow and litigation figures instead of relying on headlines.
- Use the 10-Q revenue figure of $64.6 billion, since some reports cited $64 billion.
- Compare the $3.83 GAAP earnings per share with the roughly $7.40 figure that excludes the litigation charge.
- Check closing prices with your broker. One outlet reported a gain after hours on Wednesday, while Thursday's close showed a drop of about 7%.
- If you own Meta, confirm with your brokerage how it will handle the Class C distribution when it occurs in late January 2027.

## What to watch next

Three items will decide whether this sell-off becomes a trend. The first is whether Meta confirms an equity raise and its terms. The second is when the settlement payments, which could reach roughly $18.59 billion, will hit cash. The third is whether the 2027 spending warnings from analysts turn into formal guidance.

Fourth-quarter revenue guidance of $73 billion to $76 billion will show whether the ad business can keep the cash math manageable. The Class C shares are expected to begin trading in late January 2027, which gives shareholders a firm date to watch. Until then, the stock will trade on one question: how long Meta can fund AI spending from operations before it needs outside capital.

## Frequently asked questions

### Why did Meta stock fall on October 22, 2026?

Meta shares fell about 7% to roughly $650 after the company reported $34.9 billion in third-quarter capital spending, which pushed free cash flow to negative $2.1 billion. Investors also weighed a $9.89 billion litigation charge and the possibility of an equity raise. The Nasdaq Composite fell 2.6% the same day, with chip stocks leading the decline.

### Did Meta have negative free cash flow in 2026?

Yes. Meta reported negative $2.1 billion in free cash flow for the third quarter of 2026, after operating cash flow of $32.8 billion and capital expenditures of $34.9 billion. Meta's own figures and outside coverage describe it as the first negative quarter since the company listed in 2012. A year earlier, free cash flow was about $10.6 billion.

### What is Meta's Class C stock split?

Meta plans to issue a new non-voting Class C stock to existing shareholders, which works out to a 2-for-1 split. Class C shares are expected to begin trading in late January 2027. The structure lets CEO Mark Zuckerberg keep voting control while the company raises capital for AI, pays stock compensation and funds acquisitions.

### What is Meta's 2026 capital spending guidance?

Meta's full-year 2026 capital expenditure guidance is $135 billion to $145 billion, with the floor raised from $130 billion. Several analysts warned about spending in 2027 after the report. Meta's fourth-quarter revenue guidance is $73 billion to $76 billion.

## Sources

1. [Meta Platforms, Inc. Form 10-Q, FY2026 (quarter ended Sept. 30, 2026) — SEC EDGAR](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066773/meta-20260930.htm)
2. [Meta's revenue surges to $64.6 billion, but billions in settlements and skyrocketing AI spending turn screws on profit, free cash flow — Fortune](https://fortune.com/2026/10/21/meta-q3-earnings-mark-zuckerberg-capex-muse/)
3. [Nasdaq Meta: stock falls 7% as AI capex drains cash — Pomegra](https://pomegra.io/news/nasdaq-meta-stock-falls-7-as-ai-capex-drains-cash)
4. [Meta stock drops more than 6% despite strong Q3 results, stock split — AOL/Yahoo Finance](https://www.aol.com/articles/meta-stock-drops-more-6-151218000.html)
5. [Meta Analysts Revise Price Target After Q3 Core Ad Strength, Muse Concerns Remain — Benzinga](https://www.benzinga.com/analyst-stock-ratings/price-target/26/10/62543931/meta-analysts-revise-price-target-after-q3-core-ad-strength-muse-concerns-remain)
6. [Meta Platforms Q3 2026 Earnings Call Transcript — Motley Fool](https://www.fool.com/earnings/call-transcripts/2026/10/21/meta-meta-q3-2026-earnings-call-transcript/)
7. [Meta Q3 Earnings 2026: 26% revenue growth, but a huge legal charge cuts profit — Vested Finance](https://vestedfinance.com/blog/us-stocks/meta-q3-earnings-2026/)
8. [Meta Posts $64 Billion In Revenue And Announces Stock Split In Q3 Earnings — Forbes](https://www.forbes.com/sites/antoniopequenoiv/2026/10/21/meta-posts-64-billion-in-revenue-and-announces-stock-split-in-q3-earnings/)
9. [S&P 500, Nasdaq end sharply lower as revived AI doubts ignite tech selloff — Reuters via Yahoo Finance](https://finance.yahoo.com/markets/stocks/articles/nasdaq-futures-drop-over-1-093849296.html)
10. [Stock market today: S&P 500, Nasdaq tanks as tech stocks sink amid AI trade worries, Meta shares plummet — Yahoo Finance](https://finance.yahoo.com/markets/live/stock-market-today-thursday-october-22-dow-sp-500-nasdaq-tesla-meta-112217857.html)