Meta shares gain as investors see Muse as a bigger opportunity than ads

what happened

Meta posted a strong quarter, with revenue up 26% from a year earlier to $64.6 billion, which analysts linked to AI-driven recommendation engines and higher ad prices. Dow Jones Newswires reported that the stock first rose more than 4% in after-hours trading before trimming its gain to about 2%. The shares closed near $700 on Wednesday.

Investors are focused on the Muse assistant. According to the company, more than a quarter of Muse users shop through it, with an average purchase above $200. Zuckerberg said Muse could eventually generate more revenue per user than Instagram and Facebook, with a model built on subscriptions, ads and e-commerce tools.

Meta expects capital expenditures of $135 billion to $145 billion in 2026. It spent $34.91 billion in the third quarter, slightly below the consensus estimate of $41.12 billion. Free cash flow turned negative for the first time since 2012. Revenue guidance for the current quarter is $73 billion to $76 billion.

why it matters

Negative free cash flow and rising AI spending make Meta's outlook depend on whether Muse can become a durable revenue stream. The company also created a non-voting Class C stock for deals and capital raises, which keeps Zuckerberg's majority voting power. Given Meta's weight in the Nasdaq 100, its moves also feed into the broader tech sector.

market impact

Meta and Nasdaq 100: revenue growth and AI bets support tech sector sentiment, while heavy spending weighs on free cash flow

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