Meta’s third-quarter financial disclosure failed to inspire confidence among investors, who reacted with marked apprehension. Following the release, shares of the social media conglomerate plummeted nearly nine percent in after-hours trading on Wednesday, a decline that coincided with the company’s investor conference call. Although Meta managed to surpass Wall Street’s projections by reporting a revenue of $51.24 billion—an achievement that would typically reflect solid market performance—investor enthusiasm was tempered by a combination of discouraging factors. A particularly formidable $15.9 billion tax charge, lower-than-anticipated earnings per share, and persistent skepticism about whether Meta’s immense spending on artificial intelligence research would eventually translate into meaningful profits collectively weighed down market sentiment.
Beyond these headline figures, Meta’s latest earnings call illuminated key dimensions of its current strategy and future direction, ranging from escalating infrastructure investments to shifting revenue trends across its expanding ecosystem. The following points encapsulate the key insights revealed during the call between Meta’s executive team and market analysts.
1. The cost of developing ‘novel capabilities’
During the discussion, CEO Mark Zuckerberg and Chief Financial Officer Susan Li devoted substantial attention to Meta’s mounting infrastructure costs, emphasizing how the company continues to expand its artificial intelligence backbone. Meta now forecasts that its infrastructure investment for the year will fall between $70 billion and $72 billion—a massive outlay that underscores its determination to secure AI dominance. The company also anticipates that capital expenditures will grow at an even faster pace in 2026 compared to 2025, driven by the increasing computational demands associated with AI workloads. Li confirmed that Meta intends to “invest aggressively” not only in proprietary data centers but also in third-party cloud capacity, with these expenditures exerting consistent upward pressure on the company’s overall capital outlays.
Zuckerberg further noted that, in the most pessimistic scenario, Meta would have effectively ‘pre-built’ infrastructure years ahead of demand, incurring excess depreciation expenses in the short term but benefiting later as the company’s AI capabilities expanded to fill that capacity. The greater strategic risk, he argued, would lie in the opposite approach—underinvesting in computing power and thereby limiting the company’s ability to innovate. “We’re genuinely attempting to create novel and transformative capabilities,” Zuckerberg remarked, underscoring that this effort is far more than a perfunctory process.
Employee compensation continues to escalate as well. Li indicated that salaries will represent the second-largest contributor to expense growth in 2026, reflecting the full-year impact of newly hired AI specialists in 2025 and the onboarding of additional technical recruits in key strategic divisions. “Compute and talent are where we’re leaning in hardest,” Li explained, noting that the dual focus on cutting-edge hardware and elite human expertise will ultimately define Meta’s competitive advantage in the AI era.
2. Prolonged challenges in Reality Labs
Meta’s Reality Labs division remains a major financial drain, even though its quarterly losses have contracted slightly. The division—which encompasses Meta’s investments in virtual and augmented reality hardware, AI-integrated devices, and ongoing metaverse development—generated $470 million in revenue but posted an operating loss of $4.43 billion, a marginal improvement over the $4.53 billion loss reported in the previous quarter. Li attributed recent revenue gains to retailers stocking up on Quest headsets in anticipation of the upcoming holiday season but conceded that the absence of a new model has created notable headwinds for the product line.
Despite this setback, Li maintained a cautiously optimistic tone regarding the company’s wearable AI products, stating, “We still expect considerable year-over-year growth in AI Glasses revenue during the fourth quarter, supported by strong consumer interest in our recently introduced devices.” Nevertheless, she acknowledged that these gains would likely be offset by weaker-than-expected Quest headset performance in the same period.
3. The impact of a substantial tax charge
A significant event in Meta’s quarterly reporting was the $15.9 billion one-time tax charge, tied to adjustments introduced under President Donald Trump’s One Big Beautiful Bill Act, enacted earlier this year. The new tax law necessitated a valuation allowance applied against Meta’s U.S. federal deferred tax assets, resulting in a non-cash income tax expense recognized in a single accounting period. Despite the daunting size of the charge, Li clarified that the change may prove advantageous in the long term. The revised tax framework is expected to reduce Meta’s future cash tax obligations, producing what she described as a “meaningful decline in federal cash tax payments.”
Without this extraordinary adjustment, Meta’s effective tax rate for the quarter would have fallen from 87 percent to approximately 14 percent—a dramatic illustration of how one-off accounting measures can distort underlying profitability. Li emphasized that the recalibrated tax position “places us in a favorable stance from a cash tax perspective,” a benefit that could support Meta’s ongoing commitment to large-scale investment in AI infrastructure and data centers.
4. AI as the engine of engagement
Zuckerberg emphasized during the call that artificial intelligence initiatives are already yielding tangible benefits across Meta’s principal platforms and advertising ecosystem. He cited notable increases in user engagement metrics: time spent on Facebook rose by five percent, user activity on Threads expanded by ten percent, and video consumption on Instagram surged by more than thirty percent over the past year. Zuckerberg attributed these improvements largely to AI-driven recommendation algorithms, which have proven increasingly effective at optimizing user experiences and content relevance.
He also highlighted the success of Reels—Meta’s short-form video feature—which has achieved an annualized revenue run rate exceeding $50 billion. As the prevalence of AI-generated content continues to grow, Meta’s advanced recommendation systems are poised to compound their impact even further. Li added that the company’s suite of generative AI tools designed for advertisers, capable of creating dynamic assets such as AI-generated music, is significantly improving campaign efficiency and could eventually offset some of the financial burden generated by Reality Labs. Nonetheless, both executives acknowledged that it remains uncertain whether the returns from AI applications will be robust enough to counterbalance the enormous capital expenditures the company has committed to sustaining this technological evolution.
5. AI glasses as a rising phenomenon
Prior to the earnings call, analysts were divided about whether the growing enthusiasm surrounding Meta’s AI-enabled glasses would actually convert into significant sales. Forrester Vice President and Research Director Mike Proulx had remarked that early adoption might be driven mostly by technologically curious consumers and that demonstrations could easily outstrip real-world purchases. However, Zuckerberg presented a more optimistic narrative during the call, asserting that these AI-powered eyewear devices have the potential to become “a highly profitable investment” given the early momentum in consumer demand.
He noted that Meta’s collaborations with eyewear brands Ray-Ban and Oakley are progressing commendably, generating multiple revenue opportunities—not only from device sales but also from service layers integrated atop the hardware. The CEO expressed particular enthusiasm for the capabilities embedded within the glasses, predicting that their built-in AI functions would soon become the primary reason consumers use them. Meta’s new Ray-Ban Displays collection has already sold out in nearly every retail location within just forty-eight hours of launch, with demonstration appointments reportedly fully booked through the end of the next month.
Taken together, Meta’s third-quarter report paints a complex picture of a company in the midst of transformational scaling. While investor apprehension underscores the risks inherent in such colossal investment, the company’s unwavering focus on AI infrastructure, data prowess, and next-generation hardware suggests a clear intention: to ensure that Meta remains a dominant force in the evolving landscape of digital intelligence and immersive technology.
Sourse: https://www.businessinsider.com/takeaways-meta-q3-earnings-call-2025-10
