Meta stock plunged more than 6% after the company released its Q3 2025 earnings report, which revealed that while revenue beat expectations, a one-time tax-related charge and surging AI infrastructure costs dragged down earnings per share. Despite the market reaction, the company announced plans for even larger AI investments in the coming year, signaling an aggressive expansion in its artificial intelligence ambitions.
Meta Stock Earnings Report: Revenue Beats, Profits Miss
Meta (NASDAQ: $META) reported Q3 earnings per share (EPS) of $1.05, significantly below Bloomberg’s estimate of $6.72, due to a tax expense related to restructuring and international operations. However, revenue rose to $51.24 billion, surpassing expectations of $49.6 billion.
The company’s “Family of Apps” — which includes Facebook, Instagram, Messenger, and WhatsApp — generated $50.77 billion, again outperforming forecasts. Despite the strong top-line growth, investors reacted negatively to the surprise tax hit and the forecast of heavier capital expenditures in 2026.
Federal Tax Hit and Rising Costs Pressure Meta Stock
The tax-related expense was a one-off charge, but analysts noted it highlighted the impact of new global tax regulations and deferred obligations. Meta’s CFO Susan Li said that expenses will rise sharply next year, driven by infrastructure, cloud expansion, and employee compensation — particularly for newly hired AI specialists.
Li projected that capital expenditures will reach $70 billion to $72 billion in 2025, up from the prior forecast of $66 billion–$72 billion. She added that “spending will grow even more notably in 2026,” confirming Meta’s intent to scale its AI operations across products and services.
Meta’s AI Expansion: Billions Invested in Data Centers and Talent
Unlike cloud-focused tech rivals such as Amazon (AMZN), Google (GOOG, GOOGL), and Microsoft (MSFT), Meta isn’t aiming to sell AI software to enterprises. Instead, its AI investments are being funneled into enhancing advertising performance and user engagement on its platforms.
The Meta earnings call detailed major expenditures, including:
- $14.3 billion investment in Scale AI and recruitment of its CEO as Meta’s new Chief AI Officer.
- $1.5 billion toward a new El Paso, Texas data center.
- A $27 billion financing deal with Blue Owl Capital for its Hyperion data center in Louisiana.
- Ongoing spending on AI research and developer hiring, with reports of Meta poaching engineers from OpenAI and Apple.
These moves underline CEO Mark Zuckerberg’s goal to make Meta a leader in AI-driven personalization, recommendation algorithms, and mixed reality experiences like the Ray-Ban Meta smart glasses and Quest 3 headset.
Meta Stock Price Reaction and Market Context
Following the release, Meta stock price fell over 6% in after-hours trading. Despite the dip, Meta shares remain up 27% year-to-date, lagging behind Google’s 43% and Microsoft’s 35% gains in the same period.
Analysts believe the sell-off reflects short-term tax and spending concerns rather than weakness in Meta’s business fundamentals. However, the massive jump in AI-related expenses raises questions about profit margins and the sustainability of Meta’s aggressive capital plan.
What’s Next for Meta Earnings and AI Strategy
Looking ahead, investors will watch how Meta balances AI investment with profitability. The company’s next Meta earnings date in early 2026 could offer a clearer picture of how these expenditures impact margins.
Meta’s leadership maintains that the investments are vital to maintaining a competitive edge in digital advertising and the emerging metaverse ecosystem. Still, the growing tax burden and rising infrastructure costs could keep pressure on future earnings.
As CFO Susan Li put it, “We’re entering a period where spending will accelerate before the financial benefits fully materialize.”
Final Outlook
The Meta stock earnings report paints a picture of a company in transformation — short-term financial pain in exchange for long-term dominance in AI and virtual technology. While the tax hit weighed heavily this quarter, Meta’s bold AI roadmap could redefine its growth trajectory by 2026.
Investors, however, must brace for volatility as Meta navigates mounting expenses, tax complexities, and an increasingly competitive AI race.
For more business and startup updates, visit StartupNews.fyi.
