Meta’s (META) latest earnings show strong sales but rising costs and record AI investments are weighing on investor sentiment.
Meta Platforms reported mixed third-quarter results, beating revenue expectations but missing on earnings due to a large one-time tax charge. The company’s expanding artificial intelligence investments are reshaping its balance sheet and investor outlook.
Key Points
- Earnings-per-share came in at $1.05, well below expectations, due to a $15.9 billion non-cash tax charge.
- Revenue jumped 26% to $51.2 billion, the strongest growth since 2021.
- Meta raised its 2025 capital spending forecast to $71 billion and expects even faster growth in 2026.
Meta Posts Strong Revenue but Profit Misses the Mark
Meta’s third-quarter results reflected powerful momentum in its advertising business, with ad revenue climbing more than 25% year over year. Improved AI-driven ad targeting and higher engagement across Facebook, Instagram, and Threads helped boost sales to $51.2 billion, ahead of forecasts.
However, earnings-per-share came in at just $1.05, far below Wall Street’s estimate of $6.72, mainly due to a one-time $15.9 billion tax charge linked to U.S. tax law changes. While this reduced near-term profit, the adjustment is expected to yield future cash benefits.
Operating margin slipped to 40% from 43% last year, as Meta’s costs rose faster than revenue. Research and development expenses surged 28%, driven by a hiring spree in the company’s artificial intelligence unit.
Why Is Meta Spending So Much on AI?
Meta’s CEO Mark Zuckerberg made it clear: the company is betting its future on AI. The tech giant increased its 2025 capital expenditure outlook to about $71 billion—its third upward revision this year—and warned that 2026 spending will grow “notably larger.”
The funds will fuel massive new data centers, custom AI infrastructure, and integration of artificial intelligence into Meta’s platforms. The goal is to enhance user experience through AI chatbots, smarter ad delivery, and better content recommendations for billions of daily users.
To fund these investments, Meta is planning one of the largest corporate bond sales ever—an estimated $25 billion offering. Proceeds will support AI expansion and infrastructure projects, giving Meta more flexibility to execute its long-term strategy while rates remain stable.
How Are Investors Reacting to Meta’s Spending Surge?
Investors initially reacted with caution. Shares fell more than 11% following the earnings report, reflecting short-term concerns over rising costs and shrinking margins. Some worry Meta could overspend before fully proving the payoff from its AI initiatives.
However, Zuckerberg emphasized that the company’s core advertising business remains strong and that early returns from AI integration are already visible. “We’re seeing the returns in the core business,” he said, adding that underinvesting in AI would pose a greater long-term risk.
What It Means for Investors
For those learning how to analyze stocks or exploring companies that are good to invest in, Meta’s story highlights a classic investment tradeoff: near-term cost pressure versus long-term growth potential. The company’s aggressive AI investments could reshape its business model, making it one of the best company investments for exposure to next-generation technology.
Despite a steep earnings miss, Meta’s revenue performance and continued engagement growth signal that its core business remains healthy. The company’s bond sale and data center expansion underline a clear commitment to leading the next wave of AI innovation.
For investors following the basics of investing, short-term volatility in high-spending growth companies can create buying opportunities. As Meta builds one of the world’s largest AI infrastructures, it could emerge as one of the best stocks to buy for those with a long-term view.
Conclusion
Meta’s third-quarter results illustrate both the cost and the promise of innovation. While heavy AI spending and one-time charges hit profits, record revenue growth and ambitious expansion plans show a company positioning itself for the next decade of digital transformation. For patient investors, the current pullback may be less a warning sign and more an opportunity.
FAQs
Why did Meta’s earnings fall despite higher revenue?
A $15.9 billion non-cash tax charge sharply reduced earnings-per-share, even though operational performance remained strong.
How much is Meta investing in AI and infrastructure?
Meta expects to spend around $71 billion in 2025, with even higher growth in 2026, mainly on AI data centers and technology development.
Why did Meta’s stock price drop after earnings?
Investors reacted to rising expenses and cautious guidance, leading to an 11% decline in the share price after results.
What is Meta’s bond offering for?
The planned $25 billion bond sale will help fund ongoing AI infrastructure projects and provide financial flexibility.
Is Meta still considered a good investment?
Many analysts view Meta as a strong long-term investment due to its dominant advertising business and ambitious AI strategy.
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