Shares of Meta Platforms (META 2.33%) traded sharply lower Thursday morning, falling as much as 16%. As of 10:52 a.m. ET, the stock was still down 12.3%.

The catalyst that sent the social media titan lower was the company's quarterly financial report, but not for the reasons you might think.

AI spending spree

In the first quarter, Meta reported revenue that grew 27% year over year to $36.4 billion. Expenses grew more slowly, increasing just 6%, which helped drive operating margins to 38%, up from 25% in the prior-year quarter. This fueled robust profits, as earnings per share (EPS) surged 114% to $4.71.

To put the results into context, analysts' consensus estimates called for revenue of $36.14 billion and EPS of $4.32, so Meta sailed past expectations with ease.

Meta also noted that the number of users of its family of social media sites grew 7% year over year to 3.24 billion, while advertising impressions across its family of apps jumped 20%.

That mostly sounds like a cause for celebration, so what caused the stock to plummet? Meta's plans for artificial intelligence (AI) and the associated spending. Meta raised its full-year forecast for capital expenditures to a range of $35 billion to $40 billion, up from its prior outlook of $30 billion to $37 billion. Meta said, "We continue to accelerate our infrastructure investments to support our AI roadmap." It also said capital spending to support AI will be even higher in 2025.

Context matters

Since generative AI burst on the scene last year, the demand to incorporate these advanced algorithms has been off the charts. Meta is one of just a few big tech companies with the resources to create the large language models needed to bring generative AI to life.

The company's Large Language Model Meta AI (LLaMA) AI is widely regarded as being among the top AI systems in the world, though CEO Mark Zuckerberg acknowledged, "We're investing and scaling a new product but aren't yet monetizing it."

While many analysts (slightly) reduced their price targets on Meta stock, sentiment was surprisingly upbeat. Jefferies analyst Brent Thill seemed to capture the prevailing mood on Wall Street, saying that investors should "buy the [Zuckerberg] shopping cart dip."

With Meta stock selling for just 22 times forward earnings, he's not wrong.