Meta Posted Its Best Sales Growth Since 2021—So Why Did Shares Fall?

Key Points

• Meta Q1 2026 earnings saw the company post its highest growth in over four years, and came with a large earnings per share beat.
• However, increased capital expenditure guidance overshadowed these strong results.
• While Muse Spark gets Meta back into the AI model conversation, the company has yet to flesh out monetization specifics.

On a day where a plethora of Magnificent Seven companies reported earnings, it appears that Meta Platforms NASDAQ: META got the short end of the stick.

Along with Meta, Google parent company Alphabet NASDAQ: GOOGL, Amazon.com NASDAQ: AMZN, and Microsoft NASDAQ: MSFT reported earnings on April 29. Among this group, Meta was the only name that saw a steep decline in after-hours trading.

Nonetheless, Meta’s earnings were solid, with the firm beating estimates on sales and earnings while providing guidance within expectations.

However, as has been a theme with hyperscaler stocks, investors reacted negatively to the company’s increased forecast for artificial intelligence (AI) spending.

Meta Beats on Revenue and Earnings, Posting 33% Growth

In Q1 2026, Meta reported revenue of $56.31 billion, or an increase of 33% year over year. This was near the top end of Meta’s guidance of $56.5 billion. Analysts expected revenue of $55.36 billion, a figure Meta beat by a meaningful margin.

Adjusted earnings per share (EPS) came in at $10.44, a huge 62% YOY increase. This was dramatically higher than expectations of $6.67. However, this was largely driven by an $8.03 billion income tax benefit the firm recognized during the quarter. Meta notes that excluding this tax benefit, its EPS would have been $3.13 lower, or $7.31. Thus, this was still a significant beat, equating to growth of just under 14%.

Meta also managed to keep a strong lid on expenses, posting an operating margin of 41%. This was the same as Q4 2025, while analysts expected the figure to fall to around 35%. Still, the company left its full-year total expense guidance unchanged, suggesting that margin compression will show up later in the year.

Next quarter, Meta expects revenue between $58 billion and $61 billion. The midpoint of $59.5 billion implies growth of 25%, and was in line with analyst expectations.

Key underlying metrics during the quarter were mostly strong. The firm’s daily active people (DAP), or individuals who used a Meta app once per day, rose 4% YOY. This was the company’s lowest DAP growth in at least five years. However, Meta noted that disruptions in Iran and Russia drove its lower growth, a reasonable explanation.

Ad impressions delivered rose 19% YOY, the metric’s highest growth rate since Q1 2024. Meanwhile, average price per ad increased by 12%, good for its highest growth since Q4 2024.

CapEx Guidance Weighs on Shares After-Hours

Notably, Meta raised its capital expenditure (CapEx) guidance, providing a new range of $125 billion to $145 billion for the full-year 2026. This compares to its past range of $115 billion to $135 billion. Using midpoints, Meta’s CapEx guidance rose by 8%, moving from $125 billion to $135 billion.

Meta traded down by approximately 7% after hours. It is likely that the company’s CapEx guidance drove this reaction, considering that the firm beat on the top and bottom lines. Elevated CapEx among hyperscalers is one of the primary pain points for investors, raising the bar for companies to receive a strong return on AI investments.

This is even more likely given the reasoning behind Meta’s increased CapEx. The company said its higher guidance “reflects our expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity.”

The statement shows that the primary driver of the increase is suppliers charging higher prices, while additional data center capacity is secondary. Higher component prices mean that Meta has to pay more to receive the same capacity it planned, putting further pressure on AI investment returns.

Meta Keeps AI Product Details Under Wraps Despite Muse Spark Release

Specific details around the company’s new Muse Spark model and products that it would eventually power were scant. CEO Mark Zuckerberg said, “Now that we have a strong model, we can develop more novel products as well.” However, the company didn’t clearly describe what these products would be.

This may be another reason why the stock took a tumble. AI revenue from Google, Amazon, and Microsoft is well-defined through cloud spending and/or AI model subscriptions. Meanwhile, to this point, Meta’s AI gains are primarily embedded within its improving ad business.

Still, Muse Spark is new, with Meta releasing the model around three weeks ago. Given that Meta very recently developed a strong model, seeing how its AI product line and monetization will evolve requires patience. Meanwhile, the company’s advertising engine is arguably as strong as ever. The company’s 33% growth marks its highest growth rate since Q4 2021 and is over twice as high as its 16% growth in Q1 2025.