In the seven trading days after Meta reported earnings that beat expectations, its stock fell nearly 12%—a steeper drop than the one on earnings day itself.
Meta reported its third-quarter results after the market closed on October 21: revenue of $64.6 billion, up 26% year over year, and guidance of $73 billion to $76 billion for next quarter, with the midpoint above expectations. The stock fell about 7% the next day, then closed at $614.99 on October 30, sinking even further from its pre-earnings price of $697.52.
The market is selling off over cash flow. Quarterly capital expenditures hit $34.9 billion, pushing free cash flow to negative $2.1 billion—the first time the company has burned cash in more than a decade. The lower end of its full-year capital expenditure forecast was also raised to $135 billion. Its financing plans are even more striking: the company plans to create a new class of non-voting Class C shares to raise money for AI investment, while five-year CDS hit a record high of 114.79 basis points that same day. Shareholders and creditors are starting to worry at the same time.
With advertising business so strong, why isn’t that enough? Operating cash flow was $32.8 billion, against $34.9 billion in capital expenditures. Ad revenue can no longer cover the compute bill; the shortfall can only be made up by issuing shares or borrowing. When a company shifts from returning capital to shareholders to diluting them, its valuation has to be reassessed as that of a capital-intensive business.
The connection to BTC runs through the cost of capital. When even the richest tech giants start issuing shares and credit spreads widen, while 10-year Treasury yields hover near 5%, long-term investors become more discerning. Risk assets without cash flow are the first to be asked to deliver higher returns. BTC is now around $77,900 and has been caught up in the AI stock sell-off over the past two weeks. That’s the underlying reason.
If Meta’s free cash flow turns positive in the fourth quarter, or capital expenditures don’t rise again in 2027, this assessment will need to change.
When a good company starts asking its shareholders for money, the price has to be renegotiated.
#USStocks #AI #Bitcoin $META $BTC
Meta reported its third-quarter results after the market closed on October 21: revenue of $64.6 billion, up 26% year over year, and guidance of $73 billion to $76 billion for next quarter, with the midpoint above expectations. The stock fell about 7% the next day, then closed at $614.99 on October 30, sinking even further from its pre-earnings price of $697.52.
The market is selling off over cash flow. Quarterly capital expenditures hit $34.9 billion, pushing free cash flow to negative $2.1 billion—the first time the company has burned cash in more than a decade. The lower end of its full-year capital expenditure forecast was also raised to $135 billion. Its financing plans are even more striking: the company plans to create a new class of non-voting Class C shares to raise money for AI investment, while five-year CDS hit a record high of 114.79 basis points that same day. Shareholders and creditors are starting to worry at the same time.
With advertising business so strong, why isn’t that enough? Operating cash flow was $32.8 billion, against $34.9 billion in capital expenditures. Ad revenue can no longer cover the compute bill; the shortfall can only be made up by issuing shares or borrowing. When a company shifts from returning capital to shareholders to diluting them, its valuation has to be reassessed as that of a capital-intensive business.
The connection to BTC runs through the cost of capital. When even the richest tech giants start issuing shares and credit spreads widen, while 10-year Treasury yields hover near 5%, long-term investors become more discerning. Risk assets without cash flow are the first to be asked to deliver higher returns. BTC is now around $77,900 and has been caught up in the AI stock sell-off over the past two weeks. That’s the underlying reason.
If Meta’s free cash flow turns positive in the fourth quarter, or capital expenditures don’t rise again in 2027, this assessment will need to change.
When a good company starts asking its shareholders for money, the price has to be renegotiated.
#USStocks #AI #Bitcoin $META $BTC