Meta reportedly earns a fortune – so why is the share price falling?

Meta Platforms appears to be a cash generation machine. So why has the company been increasing its debt to finance new data centres?

The answer lies in the quality and interpretation of its free cashflow. The headline figures reported to investors may give a stronger impression of underlying financial flexibility than is warranted.

Last year, Meta generated billions of dollars in cash. However, a substantial portion was effectively absorbed by real cash costs linked to stock-based compensation. These included significant withholding tax payments triggered when employee share awards vested, as well as further billions spent on share buybacks to offset share dilution.

Viewed through this lens, it becomes clearer why Meta more than doubled the debt on its balance sheet last year, taking total borrowings to $58.7bn. The company raised debt because internal cash generation was not as surplus to requirements as headline free cashflow might suggest.

In addition, reported figures do not reflect debt associated with a $27bn data centre construction project that has been kept off balance sheet through structured financing arrangements.

For investors, this creates a valuation challenge. With a market capitalisation of approximately $1.66tn, expectations embedded in the share price already appear demanding.

Source: internal calculations, as of 24 February 2026.

Free cashflow under closer scrutiny

Other large technology companies, including Alphabet, Microsoft and Nvidia, also incur material cash costs related to stock-based compensation. However, relative to free cashflow, the proportional burden appears lower than in Meta’s case.

Free cashflow is widely used by investors as an indicator of the cash available after reinvestment in the business. In theory, it represents funds that may be used to return capital to shareholders or reduce debt. However, the term does not have a single standardised accounting definition, which means headline comparisons require careful interpretation.

Meta reported $43.6bn in free cashflow for 2025. This was calculated as $115.8bn in operating cashflow less $72.2bn in capital expenditure. On paper, this suggests that core operations comfortably funded the expansion of artificial intelligence infrastructure.

In practice, cash costs directly associated with equity-based employee remuneration absorbed $42bn last year, equivalent to 96% of reported free cashflow.

European and US market overview

European equity indices remain elevated, although signs of increased volatility are emerging. Initial gains earlier in the session, partly driven by political commentary from the United States, faded as trading progressed.

In the UK, the FTSE 100 recorded only marginal movement, reflecting broader caution across developed markets. The DAX and CAC 40 also saw modest declines.

On Wall Street, sentiment remains sensitive following recent weakness in technology stocks. Major indices continue to trade near recent highs, but the latest session saw renewed pressure. The Dow Jones Industrial Average fell 1.06%, the S&P 500 declined 1.04% and the Nasdaq 100 ended 1.13% lower.

Asia-pacific markets mixed

Trading across Asia-pacific began the week with mixed performance. Chinese markets reopened following the Lunar New Year holiday. Despite weakness in US equities, regional investors appeared relatively resilient.

The Nikkei 225 rose 0.77%, while Australia’s S&P/ASX 200 edged 0.04% lower. South Korea’s KOSPI gained 1.98%. Elsewhere, Hong Kong declined 2.01%, while Shanghai rose 0.92%.