Meta just delivered a classic earnings paradox that has Wall Street scratching its head. Despite crushing revenue expectations with $51.24 billion in Q3 sales and posting adjusted earnings of $7.25 per share, the social media giant's stock plummeted over 8% in after-hours trading. The culprit? Investors are spooked by Meta's aggressive AI spending spree, with capital expenditures now projected to hit $70-72 billion for 2025.
Meta just proved that beating Wall Street's numbers isn't always enough to satisfy investors hungry for AI profits. The company's third-quarter results tell a tale of two realities - stellar revenue growth colliding head-on with eye-watering spending projections that have traders hitting the sell button.
The numbers themselves look impressive on paper. Meta's $51.24 billion in Q3 revenue sailed past the $49.41 billion analysts expected, while adjusted earnings per share of $7.25 demolished the $6.69 consensus. Revenue grew 15% year-over-year, powered by the company's core advertising business that continues to print money despite economic headwinds.
But investors aren't celebrating - they're calculating. Meta's decision to bump up its 2025 capital expenditure guidance to $70-72 billion from the previous $66-72 billion range sent a clear signal that CEO Mark Zuckerberg isn't backing down from his AI arms race with Google, Microsoft, and the rest of Silicon Valley. That's real money flowing into data centers, chips, and infrastructure that won't generate returns for years.
"The market is essentially saying 'we appreciate the revenue beat, but we're terrified of what you're spending,'" one analyst noted during the earnings call. The spending surge reflects Meta's determination to build out its AI infrastructure fast enough to compete with OpenAI and others reshaping how people interact with technology.
The company's Reality Labs division continues to be a massive cash furnace, burning through $4.4 billion this quarter while generating just $470 million in revenue. Since launching its metaverse push, Reality Labs has now lost over $50 billion - money that could have funded AI development or been returned to shareholders. Yet Zuckerberg remains committed to the long-term vision, betting that mixed reality will eventually justify the investment.
President Trump's "One Big Beautiful Bill Act" also threw a wrench into the numbers, creating a one-time $15.93 billion non-cash tax charge that complicated earnings comparisons. Meta expects this legislation to actually reduce future cash tax payments significantly, but the immediate impact made parsing the real operational performance more challenging for investors.
