Meta Reports Earnings After the Bell Today as Short Interest Climbs and Debt-Insurance Costs Rise

Meta Platforms reports third-quarter earnings after the market close today, Oct. 21. It is the first of the big AI spenders to report this cycle.

The numbers themselves have not been released. What exists so far is a set of expectations and a growing argument about how Meta pays for its AI buildout.

The stock-sale speculation

The NY Post's Charlie Gasparino reports that short sellers are positioning for Meta to sell new shares. Larry McDonald of the Bear Traps Report, which the short-selling community follows closely, told Gasparino his sources are "baking in" a large secondary offering soon.

Short-interest data from Bob Sloan of S3 Data shows positions against Meta up more than 20%, or 33 million shares, since mid-August, according to Gasparino. Gasparino also reports that a sale could be timed around the expected Anthropic IPO, with the offering coming around Thanksgiving. That timing is his reporting and McDonald's read of the market, not anything Meta has said.

A Meta spokesman would neither confirm nor deny plans for a secondary. No offering has been announced.

The counterpoint is Meta's track record. As Gasparino notes, the company has not done a large secondary sale and has so far leaned on debt to fund its AI expansion, which avoids diluting existing shareholders. He also lays out a long thesis: the Muse AI assistant, productivity gains from AI, and strategic bets like the Ray-Ban smart glasses.

The spending

In July, Meta narrowed its 2026 capital-expenditure guidance to $130 billion to $145 billion, raising the low end by $5 billion. Free cash flow in the second quarter fell to $784 million, from $8.55 billion in the same quarter a year earlier.

Analysts polled by FactSet expect Meta's capex to reach $196.3 billion in 2027. Gasparino puts the company's cash pile at $90 billion.

Across Meta, Alphabet, Microsoft and Amazon, planned capex this year totals roughly $730 billion. FactSet's analysts project about $1 trillion next year, with Alphabet alone above $310 billion.

StreetAccount expects Meta's daily active people at 3.65 billion, nearly flat from the prior quarter.

What the credit market is saying

Meta's five-year credit-default swaps traded at 111.57 basis points on Tuesday, up from 68.23 on April 20, according to Dow Jones Market Data. At that level, insuring $10 million of Meta debt costs $111,570 a year. Alphabet's and Amazon's five-year contracts sit around 80.

Meta is still far from the riskiest names. Oracle's spread was close to 320 basis points and CoreWeave's about 1,082.

Morgan Stanley data shows nearly $450 billion in AI-related debt issued globally this year, against about $216 billion in all of last year.

"Investors feel they need some hedging," Nick Elfner, co-head of research at Breckinridge Capital, said, calling swaps "a relatively affordable way to hedge if you own the bonds." He added that they can also be used to speculate on credit quality.

The bull and bear cases going in

The bull case rests on Muse. Meta's AI personal assistant debuted in September and reached the top of Apple's iOS app store. September was Meta's best month on Wall Street since 2022, CNBC reports. Meta's AI chief, Alexandr Wang, has kept releasing models, including Muse Wonder last Monday.

The bear case is about payback. Goldman Sachs questioned the business case for Meta's AI plans earlier this month, and the shares fell, trimming nearly $20 billion from Mark Zuckerberg's paper net worth. Bain & Co. has estimated that AI would need to generate about $6 trillion in annual revenue by 2031 if big tech keeps spending at the current pace, per a Bloomberg report.

Seeking Alpha contributor Damir Tokic argues Meta is the financially weakest hyperscaler and that its report could accelerate what he calls an AI bubble burst if the company raises 2027 capex. He says the number of paying Muse subscribers is the key figure, and a low count would signal poor returns on AI adoption. That is one analyst's opinion, and he says he holds no position in the stock.

Meta's own recent history adds another line item. In August the company agreed to pay nearly $17 billion to settle a lawsuit brought by a group of state attorneys general, according to CNBC.

What to watch

Three things matter after the bell: whether Meta raises its capex outlook, whether it discloses Muse subscriber numbers, and whether anyone on the earnings call asks about equity issuance and gets a straight answer. The company's spokesman has so far given none.

Alphabet and Microsoft report next Wednesday, Oct. 28, followed by Amazon on Thursday, Oct. 29. Those results will show whether Meta's spending plans are an outlier or the new baseline.