Meta Stock Falls as AI Investment Plans Overshadow Strong Quarterly Results – Breaking News
MENLO PARK, CA – October 25, 2025 – Shares of Meta Platforms (META) tumbled in after-hours trading Wednesday despite a stronger-than-expected third-quarter earnings report. The market reacted negatively to the company’s announcement of significantly increased capital expenditure (capex) plans, driven by aggressive investment in artificial intelligence (AI) infrastructure. This news, a critical development for investors tracking the “Magnificent Seven” tech stocks, underscores the growing tension between AI ambition and immediate financial returns.
Revenue Surges, But AI Costs Loom Large
Meta reported Q3 revenues of $51.24 billion, a 26% year-over-year increase, fueled by a 10% rise in ad prices. CEO Mark Zuckerberg highlighted the positive impact of AI-powered recommendation systems across Facebook, Instagram, and the rising platform Threads, noting a 5% increase in time spent on Facebook and a 10% jump on Threads. However, this positive momentum was quickly overshadowed by concerns about future spending. While earnings per share (EPS) were reported at $1.05, an exceptional $15.9 billion tax burden skewed the figure; adjusted EPS reached $7.25, still slightly below analyst expectations of $6.69.
From Metaverse Missteps to AI Arms Race
This isn’t the first time Meta has faced investor skepticism regarding ambitious spending plans. The company’s previous foray into the metaverse and augmented reality, through its Reality Labs division, resulted in tens of billions of dollars in losses, even drawing criticism from Apple CEO Tim Cook, who questioned the widespread appeal of the metaverse concept. A significant cost-cutting drive, including over 20,000 layoffs starting in late 2022, helped to restore investor confidence and fueled a remarkable 700% stock rebound over three years. Now, however, a new wave of investment is raising familiar anxieties.
The AI Spending Spree: A New Era of Tech Investment
The current surge in tech spending is largely driven by the race to dominate the AI landscape. Meta anticipates capex to reach between $70 billion and $72 billion this year, a substantial increase from previous estimates. More concerning for investors, CFO Susan Li indicated that spending will accelerate “significantly greater” in 2026 compared to 2025, as the company builds out the infrastructure needed to support its AI models. Zuckerberg emphasized a strategy of preparing “for the most optimistic cases” in AI development, a statement that some analysts, like Deepwater AM’s Gene Munster, found unsettling, suggesting a potential for “overbuilding” capacity.
Expense Growth Outpaces Revenue: A Warning Sign?
The numbers bear out these concerns. While revenue growth has steadily increased over the last three quarters (16%, 22%, and 26%), expense growth has accelerated even faster (9%, 12%, and 32%). Analysts predict this trend will continue, with revenue growth of 18% projected for next year alongside a 35% increase in expenses. As Jesse Cohen, senior analyst at investing.com, noted, “Meta’s financial results reveal the growing tension between the company’s massive investments in AI infrastructure and investors’ expectations for near-term returns.”
What This Means for Investors & the Future of AI
Meta’s situation highlights a broader challenge facing the tech industry: balancing the long-term potential of AI with the need to demonstrate profitability. The company’s commitment to AI is undeniable, and the initial results suggest a positive impact on user engagement and revenue. However, the market is clearly signaling that it will closely scrutinize Meta’s spending and demand a clear path to returns. This is a crucial moment for Meta, and its ability to navigate this delicate balance will be a key factor in its future success. For investors, it’s a reminder that even strong earnings can be overshadowed by concerns about future investment and the ever-evolving landscape of technological innovation. Stay tuned to archyde.com for ongoing coverage of Meta and the AI revolution.
