Meta Shares Slide as AI Spending Surge and $15.9B Tax Charge Hit Profits
Meta Platforms reported a sharp drop in quarterly profit after recording a $15.9 billion non-cash tax charge, while outlining plans to aggressively ramp up investments in artificial intelligence (AI).
Shares of the Facebook and Instagram parent company fell more than 12% in early U.S. trading on Thursday as investors reacted to the results.
Meta Profit Falls on Tax Hit, Despite Strong Revenue Growth
The company’s third-quarter earnings dropped to $1.05 per share, down from $6.03 a year earlier, primarily due to the large tax expense linked to U.S. President Donald Trump’s budget bill. Excluding this one-time charge, Meta’s operating margin remained a solid 40%.
Despite the profit decline, revenue surged 26% to $51.24 billion, exceeding analyst expectations of $49.36 billion, fueled by robust advertising demand. Advertising sales reached $50.1 billion, while daily active users across Meta’s family of apps climbed 8% to 3.54 billion in September.
Regulatory Headwinds and Rising AI Costs
Meta warned of regulatory challenges in both the European Union and the United States, citing risks of tighter advertising restrictions and ongoing youth-related lawsuits.
“We continue to monitor active legal and regulatory matters, including the increasing headwinds in the EU and the U.S. that could significantly impact our business and financial results,” the company said in its statement.
Meta forecast fourth-quarter revenue between $56 billion and $59 billion, roughly matching Wall Street expectations. However, it raised its full-year expense outlook to $116–$118 billion, up from a previous range of $114–$118 billion, and boosted its capital spending forecast to $70–$72 billion to meet growing AI infrastructure demands.
Meta Doubles Down on AI Expansion
The company expects both capital expenditures and overall expenses to grow “at a significantly faster rate” in 2026 as it expands computing capacity and hires additional AI engineers. CFO Susan Li said higher spending will mainly go toward infrastructure, cloud systems, and AI workforce compensation.
CEO Mark Zuckerberg reaffirmed Meta’s long-term AI ambitions, noting that projects aimed at developing AI systems capable of surpassing human intelligence are gaining traction.
Analysts at Stifel commented that while such aggressive AI spending is now standard among large tech firms, investors may soon begin scrutinizing the return on investment more closely.
The report comes amid broader market debate over whether heavy AI spending across major tech companies could inflate a new bubble, drawing comparisons to the dot-com boom of the 1990s.
