Photo Credit: Riki32 from Pixabay

Meta’s (Nasdaq: META) recently announced quarterly results that outpaced market expectations. But despite the better-than-expected performance, its stock fell 9% in the after-hours trading session. The analysts were not pleased with the one time $15.9 billion tax charge that the company incurred.

Meta’s Financials

Meta’s third quarter revenues grew 26% to $51.2 billion, ahead of the Street’s expected $49.4 billion. This was the highest growth recorded by Meta since 2024. EPS of $7.25 was also significantly ahead of the market’s estimate of $6.69. Meta said that the One Big Beautiful Bill Act signed this year by the U.S. government resulted in the one-time, non-cash income tax charge. However, going forward, it expects the law to translate to lower federal cash tax payments.

Meta’s advertising revenues came in at $50.08 billion, ahead of expectations of $48.5 billion. Reality Labs hardware division revenue was $470 million and operating loss was $4.4 billion.

Among key metrics, Meta reported a Daily Active User base of 3.54 billion across its apps, ahead of Wall Street’s expectations of 3.5 billion daily active people.

For the current quarter, Meta expects revenues of $56-$59 billion compared with analyst estimates of $57.25 billion. Meta expects to incur capital expenditures of $70-$72 billion this year compared with $66-$72 billion anticipated earlier.

Meta’s AI Investments

Big spending on AI investments remained a pattern with Meta as well. The company reiterated its plans to invest “aggressively” in its own and third-party infrastructure to support the growing demand for AI compute. Last month, it announced a joint venture with Blue Owl Capital to develop project.

The $27 billion partnership is aimed at building a data center that can meet the speed, flexibility required for Meta’s datacenter projects along with its longer-term AI ambitions. Blue Owl Capital’s expertise in digital infrastructure investment will help drive the rapid execution of the datacenter project.

As part of the agreement, Blue Owl Capital will own 80% of the joint venture, and Meta will retain a 20% stake while overseeing the construction and property management services of the data center. The data center is being built in Richland Parish, Louisiana, and will be Meta’s largest data center. The data center is expected to be completed by 2030.

Last week, Meta confirmed plans to invest more than $600 billion towards AI technology and related infrastructure in the US through 2028. Meta believes that by front-loading building capacity, it will be better prepared for the arrival of superintelligence. If superintelligence were to take longer to arrive, then it plans on using the extra compute to accelerate its core business.

It is already seeing the benefit of AI in driving engagement across its family of products. According to its reports, AI-powered recommendations have increased user time spent on Facebook by 5%, on Threads by 10%, video viewing on Instagram by more than 30% over the past year.

Videos are a big source of user engagement for Meta. Reels itself is estimated to be operating at an annual revenue run rate of over $50 billion. Meta continues to improve its video offerings and recently released Vibes, a feed of AI-generated videos, to its Meta AI app. Since Vibes was released, downloads of Meta AI on both iOS and Android have increased 56% over the month. Meta plans to continue to build and release more such AI-driven features that could keep driving user engagement.

Meta’s stock is trading at $631.76 with a market capitalization of $1.59 trillion. It hit a 52-week high of $796.25 in August. The stock has climbed from the 52-week low of $479.80 that it had fallen to in April.

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