Mark Zuckerberg’s Meta will report earnings on Wednesday, after the close of trading. The revenue numbers should be strong, with growth of 23% to $64 billion and an earnings number of about $6.50 per share (which would represent a decline of about 10% from the year-ago numbers). Costs are rising fast at the company. The earnings release could be confusing, as the company will likely take a $10 billion charge related to legal expenses. Regardless, the quarterly results should confirm that Meta’s business trends are excellent.
The critical numbers to watch will be capital spending plans for calendar years 2026 and 2027. The company is expected to guide 2026 capital spending to around $140 billion. As for 2027 capital spending, analysts expect an aggressive increase to as much as $235 billion. As a leader in the artificial intelligence revolution, Meta’s quarterly financial results are always important, but the numbers to be released Wednesday have suddenly become more than just an ordinary quarterly financial report. What Meta says could arguably impact not only the trajectory of investment in AI but also the economy of the United States. Investment in AI is responsible for as much as 50% of current-year GDP growth.
Fear is gripping the AI complex, from the fabricators to the broader semiconductor industry. The VIX, a measure of volatility and overall investor sentiment, has spiked after months of trading in a narrow, benign range. The sharp rise in the VIX is signaling the market’s sudden skepticism that the massive investment, trillions of dollars, in Artificial Intelligence will generate sufficient profits to make such investments economically viable. Moreover, the semiconductor sector, which is at the foundation of the AI revolution, just experienced its worst trading performance in 18 years amid fears of a slowdown in AI spending.
Gartner, a well-regarded research company, issued a highly cautionary outlook last week regarding investments in the NeoCloud space. NeoCloud companies such as CoreWeave and Nebius rent out high-performance computing infrastructure for AI applications. In the report, Gartner predicts that over 80% of NeoCloud providers will cease independent operations by 2030 because of severe cost pressures and inadequate revenue generation.
Gartner says that AI infrastructure owners require an estimated $8.5 trillion in cumulative revenue through 2030 to cover capital expenditures plus a standard 12% return on invested capital. But Gartner forecasts that AI revenue will only reach about $3.6 trillion during that window.
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Meta’s numbers will offer an important opportunity to test the revenue-generating capabilities of AI applications. Meta is an extremely large business with several profitable AI platforms—Facebook and Instagram, for example—that can generate revenue. Can AI create improved recommendations that keep users engaged? More accurate advertising systems can help businesses reach customers who are more likely to buy. Tools that simplify the creation of advertisements can make the platform more valuable to smaller companies. Moreover, Meta recently introduced the AI app Muse, which could upend the entire e-commerce ecosystem.
Meta’s numbers could offer persuasive evidence that investment in AI will generate strong economic returns on capital. Advertisers will spend more if Meta delivers better results. The relevant question is how much additional profit those improvements produce relative to the infrastructure required to support them.
James Rogan is a former U.S. diplomat who later worked in law and finance for over 30 years. He writes a subscription based daily note on markets, economics, politics and social issues. His email is [email protected].