Meta Stock Falls Even After Strong Revenue Report

Meta Platforms Inc. delivered a resounding third-quarter earnings beat on Wednesday, with adjusted earnings per share of $7.25 topping analyst expectations of $6.69 and revenue surging to $51.24 billion against forecasts of $49.41 billion, as polled by LSEG. The results underscored the social media giant’s robust advertising engine and user engagement amid a resurgent digital ad market, yet Meta META -1.20% ▼ shares tumbled 1.2% in after-hours trading to $582.34, capping a volatile session that saw the stock dip 0.3% during regular hours. Investors, spooked by Meta’s forecast of “significant acceleration” in AI-related infrastructure costs next year—potentially ballooning to tens of billions—brushed aside the positives, signaling growing unease over the sustainability of Big Tech’s AI arms race.

The earnings, released after the bell on October 29, highlighted Meta’s operational resilience. Net income soared to $15.69 billion, or $6.03 per share, a 35% jump from $11.58 billion, or $4.39 per share, a year earlier—well ahead of FactSet’s consensus of $5.22. Revenue climbed 19% year-over-year, fueled by a 22% uptick in ad sales to $50.1 billion, as daily active users across Facebook, Instagram, and WhatsApp swelled to 3.28 billion, up 6% from last year. CEO Mark Zuckerberg touted the quarter as a “strong foundation” for AI integrations, including enhanced Reels recommendations and Llama model advancements, which drove a 12% increase in time spent on the platforms.

Yet, the post-earnings glow faded swiftly. Meta’s guidance for Q4 projected revenue of $52.5 billion to $54 billion, in line with Wall Street’s $53.2 billion midpoint, but the real headwind was the capex outlook. The company flagged a “meaningful ramp” in 2026 AI infrastructure spending, on top of the $39 billion already earmarked for 2025, to fuel data centers and GPU acquisitions from Nvidia Corp. “We’re investing aggressively in AI to stay ahead,” Zuckerberg said on the earnings call, but analysts like Bank of America’s Justin Post worried aloud about the “long-term growth manifestation” of these outlays, especially as rivals like OpenAI pivot toward ads and social features, intensifying competition in Meta’s core turf.

The reaction rippled across global markets. In Frankfurt pre-market trading Thursday, Meta (META.O) shares slipped 2.6% to €530, mirroring a 5.1% drop in Microsoft Corp. (MSFT.O) amid its own Azure cloud growth slowdown warning—dragging Nasdaq futures down over 1%. The Magnificent Seven cohort, already under scrutiny for AI hype, saw broader pressure: Alphabet Inc. and Amazon.com Inc. reports later in the week loom large, with investors parsing for similar spending spikes. “Meta’s beat was textbook, but the AI capex fog is thick—it’s all about the denominator now,” said Wedbush Securities analyst Daniel Ives, who maintains an Outperform rating but trimmed his price target to $650 from $675.

Meta’s Q3 performance aligns with a digital ad sector rebound, projected to grow 12% to $740 billion globally in 2025 per eMarketer, buoyed by election-year spending and e-commerce tailwinds. Reality Labs, Meta’s metaverse arm, narrowed losses to $4.2 billion from $5.1 billion, with Quest headset sales up 15%—a bright spot amid Zuckerberg’s pivot to AI glasses and wearables. Still, the stock’s 1.2% after-hours slide erased $25 billion in market cap, leaving Meta at $1.48 trillion—down 5% year-to-date versus the Nasdaq’s 23% gain.

Looking ahead, Wall Street eyes Meta’s AI monetization roadmap at next week’s investor day, where details on ad-targeting LLMs and enterprise tools could assuage fears. For now, the earnings saga encapsulates Big Tech’s paradox: explosive growth meets escalating costs in an AI gold rush that has minted trillion-dollar valuations but risks a valuation reset if returns lag. As Ives put it, “The party’s still on, but the bill just arrived.”