Meta Stock Has Dropped the Day After 3 Straight Earnings Reports. Is It a Buy Now?

Meta Platforms (NASDAQ:META) has made a habit this year of posting a strong quarter and then seeing its stock sink the next day. Shares fell around 7% on Oct. 22, after the company said third-quarter revenue rose 26% year over year. This followed post-earnings drops of about 9% on April 30 and 8% on July 30.

That's a big change from January, when the stock popped about 10% after Meta's fourth-quarter report.

The stock now trades near $649 as I write, about 17% under its Sept. 24 close of about $778 (its highest close in about a year). Yet, for all the selling, shares are down just about 3% for 2026.

Looking back at each report, I think the selling had more to do with what Meta is spending than with what it's earning.

Spending, every time

The first-quarter numbers in April were excellent on their own. Revenue climbed 33% year over year to $56.3 billion, Meta's fastest growth since 2021.

But management also lifted its 2026 outlook for capital expenditures (including principal payments on finance leases) to a range of $125 billion to $145 billion, up from $115 billion to $135 billion. CEO Mark Zuckerberg said on the first-quarter earnings call that most of the increase was "due to higher component costs, particularly memory pricing."

July's report showed what that spending does to cash. Free cash flow dropped to $784 million in the second quarter, from $8.5 billion the year before. And Meta's third-quarter revenue forecast pointed to year-over-year growth between 19% and 25%, down from 28%.

In October, free cash flow went negative, at minus $2.1 billion. Meta also raised the bottom of its 2026 spending range to $135 billion and said it plans to keep "investing aggressively" in 2027.

The ad business held up

Meta's revenue growth has slowed a bit this year, from 33% in the first quarter to 28% in the second and 26% in the third. But for a social media company taking in around $64.6 billion a quarter, 26% growth is still impressive.

Showing how steady the main business has been, Meta's operating cash flow was $32.2 billion in the first quarter, $31.9 billion in the second, and $32.8 billion in the third. Capital expenditures, meanwhile, climbed every quarter, from $19.8 billion to $31.1 billion to $34.9 billion. In other words, nearly all of the slide in free cash flow came from spending, but the cash coming in hardly budged.

Of course, operating cash flow grew just 9% year over year in the third quarter, down sharply from 34% early in the year.

That said, advertisers are still paying up. The average price per ad rose 14% in the third quarter, accelerating from 12% in both prior quarters. And management's forecast of $73 billion to $76 billion for fourth-quarter revenue points to 22% to 27% growth year over year.

After the sell-offs

Buying after a drop has played out very differently this year. After the April 30 sell-off, shares swung between around $543 and $681 before closing at about $586 the day of the July report -- below where they finished April 30.

But investors who bought after the July 30 drop, when the stock closed near $539, watched it rise about 44% to the Sept. 24 close.

The next report might mean more selling. Meta spent around $85.8 billion on capital expenditures through September, so its full-year range points to fourth-quarter spending of about $49 billion to $59 billion. Free cash flow may sink further below zero.

"[W]e don't have anything more specific or quantitative to share until we get to the Q4 call which is typically when we share guidance for the next year," CFO Susan Li said on the third-quarter earnings call, when asked about 2027.

Is Meta stock a buy now?

At around $649, the stock trades at about 19 times expected earnings in 2027. The S&P 500 (SNPINDEX:^GSPC) trades at about 19 times forward earnings, so investors are paying about a market-average price for a company still growing revenue more than 20%.

Legal costs might drag down results, too. The third quarter had a $9.9 billion charge tied to an agreement with state attorneys general. Separately, a New Mexico judge ordered Meta on Oct. 21 to pay a $25 billion civil penalty under the state's consumer protection law. The company said it'll appeal.

But I think the stock is worth a look after this latest drop. Meta keeps pulling in around $32 billion in operating cash each quarter, even while the spending grows. With Meta's 2027 budget still unknown, I'd consider buying bit by bit. A fourth drop after the next report wouldn't surprise me.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.