Hey Superheroes,
NEXTDC (ASX:NXT) shed around 40% this week after the data centre operator cut its FY2027 earnings outlook, citing a power delay at its Melbourne data centre. The moves reflect a broader reassessment of technology and AI infrastructure names that has rippled from Wall Street to the ASX.
Brent crude topped US$111 a barrel on 22 October, its highest close since the war with Iran began, after Iran’s state television reported seven tankers damaged in the Strait of Hormuz. The Nasdaq Composite fell 2.6% to 26,008.86, its worst session since June, with Meta Platforms (NASDAQ:META) weighing on tech after reporting negative quarterly free cash flow. The S&P 500 fell 1.21%.
The S&P/ASX 200 closed 0.43% lower at 8,793.2, with Energy the worst-performing sector, down 2.42%. Woodside fell 3.5% and Fortescue dropped around 4.5% on concerns over China’s negotiating stance, as Materials shed 1.96%. Markets are now watching the Federal Open Market Committee rate decision on Wednesday 28 October (5:00am AEDT Thursday 29 October).
Meta’s cash burn notice
Meta (NASDAQ:META) has spent two years telling investors its AI spending would pay for itself. This quarter, for the first time since it listed in 2012, it spent more cash than it brought in. That matters because free cash flow, the cash left over after a company pays for its data centres, servers and other big investments, is one of the most reliable gauges of how healthy a business really is underneath its headline profit.
The numbers
Meta grew revenue 26% to US$64.6 billion, ahead of the US$63.37 billion analysts expected. The problem was on the other side of the ledger. Capital spending of US$34.91 billion outran US$32.79 billion of operating cash flow, leaving free cash flow at negative US$2.12 billion, down from positive US$10.63 billion a year earlier.
Profit also absorbed a one off legal charge of US$9.89 billion. Meta shares fell 7% on Thursday to close at US$648.85.
The guidance
Meta raised the floor of its 2026 capital spending range to US$135 billion to US$145 billion, up from a previous low end of US$130 billion. It also guided to fourth quarter revenue of US$73 billion to US$76 billion, ahead of estimates, and made no share buybacks in the third quarter.
Bond investors noticed. The cost of insuring Meta’s debt against default rose to a record high on Thursday, a sign some lenders are growing more cautious as the spending climbs.
The new share class
Meta will create a new class of nonvoting Class C shares, handed out as a one time dividend of one Class C share for every Class A and Class B share held. In practice it works much like a two for one stock split. The structure keeps Mark Zuckerberg’s voting control in place while giving Meta a new way to raise capital, pay employees and fund acquisitions.
What the numbers don’t tell us
One negative quarter is not a cash crunch. Meta still holds US$82.45 billion in cash and marketable securities, and its advertising business is still growing at 26%.
What the numbers can’t tell us yet is whether this level of AI spending will earn an adequate return, or whether Meta will actually use the new shares to raise money. The company hasn’t said it plans a large share issue, so any dilution for existing shareholders depends on how and when the shares are used.
Nick of time warning
Nick Scali (ASX:NCK) has been selling sofas to Australians since 1962. On Thursday it told the market the housing slowdown is hitting harder than expected.
The result
Nick Scali now expects underlying net profit of A$28 million to A$32 million for the six months to 31 December 2026. That compares with A$41 million a year earlier and sits about 20% below what the market had expected. Revenue in its Australia and New Zealand business is expected to fall 11% to 14% year on year.
Investors didn’t wait around. Shares fell 15.3% to A$12.03 on Thursday.
Why housing matters
Big furniture purchases tend to follow the property market. When fewer people buy and move homes, fewer people buy new lounges. Nick Scali said the cut was mainly due to the housing slowdown in Australia and New Zealand, where written sales orders fell 15% year on year in the first quarter and store traffic dropped 10%.
The guidance also excludes about A$980,000 in costs linked to a cyber incident the company dealt with in August.
A smaller profitable base
The UK is a bright spot, with written sales orders up 29%, though that growth comes from a much smaller base than the core business.
The guidance also covers a half that isn’t finished yet, with Christmas and the January sales period still to come. The A$4 million gap between the top and bottom of the range is a sign of how much is still uncertain. With markets expecting another RBA hike in November, though, the housing headwind may take some time to ease.
Some other things we’re shining the Spotlight on:
NAB axes 2,500 roles
National Australia Bank (ASX:NAB) announced on 20 October that it expects to cut up to 2,500 roles by June 2027, about 6% of its internal workforce, including up to 1,500 by Christmas. It is one of the largest single workforce reduction announcements from an Australian bank in recent years. The scale and speed of the cuts point to a structural shift in NAB’s operating model rather than a routine efficiency program, and the announcement will sharpen scrutiny of workforce strategy across the major banks heading into the next round of results.
Your RoboTaxi is delayed
Tesla (NASDAQ:TSLA) reported Q3 2026 revenue of US$28.05 billion, flat year on year, while GAAP net income fell 43% to US$787 million as operating expenses rose 39%. Gross margin improved to 19.6% from 18.0% a year earlier and free cash flow recovered to US$1.53 billion from negative US$1.09 billion in Q2. Deliveries totalled 486,532 vehicles, down 2.1% year on year. Tesla pushed the timeline for unsupervised full self-driving to Q2 2027, limited to designated robotaxi zones.
Unzipped
Zip Co (ASX:ZIP) opened down close to 50% on 23 October after flagging costs tied to a US fraud event and a weak start to the FY2027 first quarter. The fall was one of the steepest single-session moves for an ASX 200 financial stock in recent years.
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