Meta’s Stock Falls as Trump Bill Imposes $16 Billion Tax Charge

Meta’s stock experienced a significant decline of over 12% as trading commenced on Thursday. This sharp drop is attributed to a nearly $16 billion tax charge that negatively impacted its quarterly earnings.

Key Losses and Financial Performance

As of Thursday morning, Meta’s shares fell by 12.3%, settling around $658.50. This marks the largest intraday loss for the company since October 2022, when the stock dropped by 24.5%.

The company reported its earnings for the third quarter, revealing earnings per share (EPS) of $1.05. This figure is a staggering 84% below analysts’ forecasts of $6.72, according to FactSet. Despite this, Meta’s revenue reached $51.2 billion, exceeding the estimates of $49.5 billion.

Impact of Tax Charges

• Meta’s previous year’s EPS stood at $6.03, illustrating an 83% decrease.
• The substantial drop was primarily due to a one-time tax charge of $15.9 billion linked to Donald Trump’s One Big Beautiful Bill Act.
• Without the tax burden, Meta projected its EPS would have been $7.25.

Additionally, the company anticipates a “significant reduction” in federal cash tax payments for 2025 and beyond.

Future Outlook and Investments

In light of the ongoing challenges, Meta has raised its capital expenditures guidance from a range of $66 billion to $72 billion, now estimating between $70 billion and $72 billion. CEO Mark Zuckerberg emphasized that the company is “aggressively” preparing for advancements in superintelligence.

Meta’s Reality Labs division, which develops virtual reality products, reported an operating loss of $4.4 billion. This was on $470 million in sales, slightly better than Wall Street’s expectations of a $5.1 billion loss on $316 million in revenue.

Comparative Performance in Tech Sector

In contrast to Meta, Microsoft shares fell 2.2% to approximately $529.40 after releasing its quarterly results. Despite posting earnings of $4.13 per share on revenues of $77.6 billion, a $3.1 billion hit to net income from its investment in OpenAI led to stock declines.

Unlike its peers, Alphabet experienced a rise of 2.7% in its stock price following a quarterly report indicating revenues exceeding $100 billion for the first time, totaling $102.3 billion.

What Lies Ahead

Looking forward, both Apple and Amazon are set to announce their earnings after market close on Thursday. Analysts expect Apple’s EPS to be $1.78 and revenues around $102.2 billion, while Amazon’s EPS is projected at $1.57 with revenues expected to hit $177.9 billion. Nvidia will conclude the earnings reports for the “Magnificent Seven” on November 19.

Strategic Investments in AI

Despite the unsettling drop in stock, Meta’s shares have increased by 10% over the year prior to Thursday’s decline. The company has invested billions to develop AI capabilities, including a notable $14.3 billion investment in the startup Scale AI. Meta also hired Scale AI’s CEO, Alexandr Wang, to spearhead its AI initiative, Superintelligence Labs.

Additionally, Meta has engaged in significant cloud partnerships, including a six-year, $10 billion agreement with Google, aimed at enhancing its AI infrastructure.