An early indication of a modest decline turned into a loss of about $128 billion in market value during the regular session. Credit investors bid up the cost of insuring Meta's debt, and a $25 billion New Mexico penalty, handed down a day earlier, is separate from the legal charge in Meta's expense forecast.
Before dawn on Thursday, Meta Platforms was indicated down about 1.6%. By early afternoon, the decline was more than four times as large.
Shares traded at about $647.24 at 1:46 p.m. Eastern, down 7.2% from Wednesday's $697.52 close, on more than 28 million shares. The stock opened at $675.79 and slid for most of the session, touching $644.32. At the afternoon price, Meta had lost roughly $128 billion of market value in a day.
The credit signal
Two things weighed on the stock as the session went on. The first was in credit. The price of five-year credit-default swaps on Meta's debt hit a record on Thursday, and its bonds fell, as investors focused on how much debt the company may need to fund its AI build-out.
The concern follows from the quarter's cash math. Capital spending exceeded operating cash flow, leaving free cash flow at negative $2.12 billion, and Meta raised the low end of its 2026 spending range by $5 billion. The new nonvoting Class C stock gives Meta an equity route, but the swap market's move suggests investors expect borrowing to carry a large share of the load.
Default-swap prices are a measure of the cost of protection, not a forecast of default. For a company of Meta's size, the record says more about the expected supply of its bonds than about its ability to pay.
A penalty on top of the charge
The second was legal, and it predates the earnings report. On Wednesday afternoon, before Meta released its results, a New Mexico judge ordered Meta to pay $25 billion in civil penalties under the state's Unfair Practices Act, in a case tied to the Cambridge Analytica scandal, after a jury found Meta had deceived users. The state's Department of Justice said the jury found nearly 44 million violations. Judge Francis Mathew found that more than $219 billion was warranted under state law before cutting the total to $25 billion.
That penalty is separate from the agreement of up to $18.59 billion with 52 state attorneys general over teen mental-health claims, which sits behind the $9.89 billion legal charge in Meta's full-year expense forecast of $175 billion to $179 billion. Meta said it will appeal. "We are confident we will prevail on appeal," Chief Legal Officer C.J. Mahoney said. The company has not said whether it will set money aside for the penalty. The $25 billion is about 1.5% of its market value at Thursday's lower price, and about 2.5 times the legal charge already taken.
Company or sector?
Not all of the decline is Meta's own. The Nasdaq fell about 2.4% and chip and AI-infrastructure stocks dropped sharply in the same session, after results from Tesla, IBM and Lam Research as well as Meta. But the record in Meta's swaps is specific to Meta, and the penalty is too.
What to watch
Any bond sale or first Class C offering, the appeal of the New Mexico judgment, and the company's quarterly filing for more detail on lease and contract commitments. Its scheduled youth trials are the next legal catalysts.