Meta Platforms Stock Analysis: Meta Platforms’ stock plunged after the company reported its third-quarter 2025 earnings. Still, a $16 billion one-time tax charge linked to the “One Big Beautiful Bill” of former US President Donald Trump was primarily to blame. Accordingly, Meta’s earnings per share in the 2024 fourth quarter decreased 85% to a projection of 6.70 per share, or just $1.05 per share, far off projections. Meanwhile, Meta’s revenue increased 26 % year over year to $51.24 billion, the highest on record.
The tax charge relates to the new US corporate alternative minimum tax provisions introduced by this bill, which resulted in a deferred tax asset write-down that was recorded in Meta’s final income statement. Despite the tax charge drastically slashing reported profits for the quarter, Precisely expects that it will result in a significant reduction in actual future US federal cash tax obligations for the rest of 2025 and subsequent periods, potentially making its cash tax efficiency more attractive in the long run.
Apart from the tax hit, Meta expects its 2026 expenses to surge sharply, primarily due to extensive investment in artificial intelligence development. The company increased its 2025 capital expenditure view to $70-$72 billion, up from $66-$72 billion, and indicated that 2026 spending will likely exceed $100 billion. That close doubling of capital spending expenses underscores Meta’s strategic and tactical imperative. The company will spend money to grow its AI infrastructure, including data centres, facilities, and the hiring of top talent. CFO Susan Li said infrastructure expenditures, such as money spent on cloud services, data centre depreciation, and the usage of other clouds, would be the majority of the expense increase next year.
Since the beginning of the year, Meta has invested heavily in capital. Meta’s capital investments this year have included a $14.3 billion purchase of AI startup Scale AI, a $27 billion financing agreement for the Hyperion data centre located in Louisiana, and a $1.5 billion investment in a new Texas data facility. Meta has spent the past 8 years aggressively seeking the best AI talent and offering more than stiff packages to specialists to pry them away from other major technology companies. Mr Zuckerberg quipped that his company was ready for the day when the initial superintelligence would spring to life. He is convinced that the payoff on these investments will be incredible, but acknowledges that the return is already beginning.
While the results outlined strong revenue growth and AI-driven spending efforts deemed critical to “keeping Meta’s competitive edge” in advertising technology, the market reacted negatively for several main reasons. The most vital among them was the short-term hit to profit and the increasingly overpowering continuation of expenses. Overall, Meta’s shares dipped roughly 8-12% right after the earnings release based on investors’ apprehension about” in-place margin compression threats and the outcome of present and potential court costs and regulatory investigations involving the US and EU markets”.
Therefore, Meta’s third-quarter 2025 earnings appear to be a one-off event, with a $16 billion negative tax impact related to recent US tax changes, and the evaluation of 2026 expenses is also a one-off expense, but has been significantly increased by the rigged AI infrastructure and talent investments. Although in the short term the company’s plans and actions scared investors, in the long term, Meta plans to revolve its business around AI implementation as a significant growth strategy, which would support its advertising business and other technological ideas.