Meta earnings jolt markets: $51.24B revenue beats, $15.93B tax hit hammers EPS; stock slides on bigger AI spend

Meta (META) delivered a headline-grabbing quarter that split investors down the middle: record revenue of $51.24 billion (up ~26% year over year) alongside a GAAP EPS of $1.05, crushed by a one-time, non-cash tax charge of $15.93 billion. Shares fell 8–10% after hours on Wednesday as traders weighed the beat on sales against sharply higher capital-expenditure plans for AI.

Meta earnings: what’s behind the numbers

Stripping out the tax hit tied to new U.S. rules that change how deferred tax assets are treated, management said diluted EPS would have been $7.25, above typical Wall Street estimates. The top line benefited from sturdy ad demand and better monetization across Facebook, Instagram, and messaging surfaces, aided by AI-driven performance tools.

Quarter at a glance

• Revenue: $51.24B, +~26% y/y (record)

• GAAP EPS: $1.05 (down sharply due to one-time charge)

• Underlying EPS (ex one-time): ~$7.25

• Q4 revenue outlook: $56–$59B

• Capex 2025: $70–$72B (raised again for AI infrastructure)

• Reality Labs loss: ~$4.43B in the quarter

The company emphasized that the tax item is non-cash and that federal cash tax payments should be lower going forward, but the magnitude of the accounting charge still dominated the GAAP print.

Why META stock fell despite strong sales

Two forces undercut the initial enthusiasm:

1. Capex keeps climbing. Management lifted 2025 spending plans to $70–$72B to accelerate data centers, networking, and custom AI hardware. Investors wanted clearer near-term payback from those outlays.

2. Guidance that’s solid, not spectacular. The Q4 revenue guide of $56–$59B implies continued growth but not the kind of upside that offsets capex sticker shock.

With the stock up strongly year-to-date into the release, the bar was high; the combination of a GAAP miss and bigger AI bills invited profit-taking.

Inside the Meta earnings call: AI first, everything else second

Leadership doubled down on AI as the company’s central growth engine—powering ad relevance, creator distribution, smart assistants, and the wearables push. The message: front-load compute now to widen the moat later. Hiring and opex will remain concentrated in AI and infrastructure through 2026, even as other areas stay lean.

Reality Labs remains a long-cycle bet. Losses narrowed a touch but are still substantial; management highlighted momentum in smart glasses and developer tools as precursors to broader mixed-reality adoption.

What the Meta stock move means for the market

The after-hours slide pulled futures for megacap tech lower and took some heat out of broader stocks. For index watchers eyeing the Dow today, the read-through is that AI build-outs are moving from press releases to real cash demands; multiples may compress if investors don’t see faster revenue capture from AI products.

Key investor debates from here

• AI ROI cadence: When do LLM-driven products and glasses scale enough to offset higher depreciation and power costs?

• Ad durability: Can Reels, Shops, and messaging ads keep conversion gains without heavy promo?

• Expense guardrails: Full-year expenses guided to the low-to-mid-$110B range keep pressure on operating leverage if growth cools.

Taxes, the one-time hit, and what changes next

The $15.93B charge reflects valuation allowances and recalibration under new U.S. tax law mechanics. While it distorted GAAP EPS, management signaled lower cash taxes ahead. For long-only holders, the question is less the accounting swing and more whether free cash flow trends stay intact against higher capex.

Quick scorecard

What to watch into year-end

• Ad velocity: Holiday conversion rates and pricing power on performance ads.

• AI product lift: Engagement and monetization metrics tied to new assistants, creator tools, and smart-glasses features.

• Free cash flow vs. capex: Whether operating cash can comfortably fund the build while supporting buybacks and the balance sheet.

• Regulatory/tax follow-through: Any further rule changes that alter expense or tax assumptions.

The Meta earnings story this quarter is a study in contrasts: record sales and strong underlying profitability versus a GAAP headline hit and an even bigger AI build-out. For META stock, the path forward hinges on converting that spend into measurable revenue and margin lift in 2026. Until investors see the bridge from data centers to dollars with greater clarity, the shares will trade every data point—ad trends, AI usage, capex milestones—as a referendum on that promise.