Meta shares collapsed 9% after the report. Profit fell far short of expectations

Shares of Internet giant Meta, which owns social networks Facebook and Instagram, collapsed by 9% in extended trading on October 29. The main reason for investors' disappointment was probably the profit: it was about six times lower than Wall Street expectations due to a one-time income tax expense of nearly $16 billion. In addition, Meta raised the lower end of its annual spending forecast to reflect its spending on infrastructure for artificial intelligence.

The value of Meta shares on the postmarket fell to about $683 - it is 9.1% less than the closing level of the main trades. After that, however, the securities partially recovered their losses: they decreased by about 7%. The main trading session on Wednesday ended practically without price changes: the securities added insignificant 0.03%.

Meta reported revenue growth of 26% to $51.2 billion in the third quarter ended Sept. 30, the highest revenue growth rate since the first quarter of 2024, CNBC notes.

However, adjusted EPS (Diluted EPS) decreased 83% year-over-year to $1.05 in 2024. The company attributed this to a one-time $15.93 billion non-cash income tax expense related to Donald Trump's "Great and Beautiful Law." Without it, adjusted earnings per share would have reached $7.25, Meta said, while it expects the law to provide a "significant reduction" in its cash payments for U.S. federal taxes for the remainder of 2025 and beyond.

In addition, Meta's CFO Susan Lee said after the publication of the statements that the company's capital expenditures in 2026 will be "noticeably higher" than in 2025, and total expenses will grow "at a significantly higher rate" than in the current year. This was the main reason for the fall in Meta's shares in the postmarket, according to Bloomberg.

Meta has increased the lower bound on its 2025 spending forecast: it now expects it to be between $116 billion and $118 billion instead of $114-118 billion. Meta has also similarly updated its 2025 capital expenditure forecast: it now estimates it to be between $70 billion and $72 billion (previously $66-72 billion).

CEO Mark Zuckerberg attributed this to Meta's growing need for computing power for AI projects: this requires additional investments in data centers and cloud services, CNBC reports. "This suggests that the opportunity to significantly increase investment here is likely to prove to be a profitable decision after some period," Zuckerberg said in a conference call with analysts after the report (quoted by CNBC).

Meta's CEO added that the company intends to "aggressively build infrastructure capacity upfront" to ensure it is the leader in terms of available resources for its AI strategy, Bloomberg reported. "We want to make sure we're not underinvesting," the agency quoted Meta's CEO as saying.

At the end of the quarter, the number of daily active users on all Meta platforms reached 3.54 billion - this is higher than Wall Street's forecast (3.5 billion, according to data cited by CNBC). Advertising revenues amounted to $50.08 billion - against the expected $48.5 billion.

Meta expects fourth-quarter revenue to be between $56 billion and $59 billion, the midpoint of that range beats analysts' consensus forecasts, according to StreetAccount, CNBC writes.

The biggest loss of the company - $4.4 billion on revenue of $470 million - was again brought by the Reality Labs division, which is responsible for virtual and augmented reality devices. In the fourth quarter, Reality Labs' revenue will be lower than it was a year earlier, Meta's CFO warned. This is due to the fact that the company did not introduce a new VR headset in 2025, and retailers purchased existing devices back in the third quarter.

"We continue to expect strong year-over-year revenue growth from AI glasses in the fourth quarter due to strong demand for new products. However, this growth will be more than offset by lower sales of Quest headsets," explained Lee.

In September, Meta unveiled the first consumer AI glasses with a display - the Ray-Ban Meta Display for $799. According to Zuckerberg, the device is already sold out, with demo slots occupied through the end of November. "It's up to us to invest in expanding production and growing sales of these glasses," he added.

Meta continues to invest aggressively in AI: for example, the company signed a $27 billion deal with Blue Owl Capital to build a large-scale data center in Louisiana. And in September, it signed a $14.2 billion deal with CoreWeave for cloud infrastructure for AI. In September, Meta added a new feature to its AI app called Vibes, a feed of neural network-generated videos. According to Appfigures, Meta AI downloads on iOS and Android grew 56% month-over-month to 3.9 million as of Oct. 18 after the launch of Vibes.

Meta stock has a total of 71 ratings from analysts and most advise buying the stock, with 52 Buy ratings and 10 Overweight ("above market"), MarketWatch shows. The remaining eight analysts recommend holding the stock (Hold). The average target price of $869.87 implies a potential upside of 15% from the last closing price.

This article was AI-translated and verified by a human editor