Meta stock drops 12% as heightened AI spending overshadows strong third-quarter results

Meta Platforms saw its stock price tumble over 12% on Thursday, as investor apprehension surrounding its substantial investments in artificial intelligence overshadowed robust third-quarter performance. The social media behemoth has increased its capital expenditure guidance for 2025, now estimating costs between $70 billion and $72 billion, up from a previous range of $66 billion to $72 billion. This surge in spending comes as Meta competes fiercely with other tech giants to advance its AI capabilities. During the earnings call on Wednesday, CEO Mark Zuckerberg defended the company's bold financial commitments, stating, "It's pretty early, but I think we're seeing the returns in the core business. That's giving us a lot of confidence that we should be investing a lot more, and we [want to] make sure that we're not underinvesting." Zuckerberg emphasized Meta's proactive approach to developing its infrastructure in anticipation of superintelligence, asserting that the company aims to be well-positioned for significant opportunities ahead. This ambition aligns with broader trends across the tech industry, as competitors like Alphabet and Microsoft also ramp up their AI-related expenditures. Earlier this year, Meta made headlines by investing $14.3 billion in the AI startup Scale AI and appointing its CEO, Alexandr Wang, to spearhead its Superintelligence Labs initiative alongside former GitHub CEO Nat Friedman. Additionally, Meta has secured several new cloud partnerships to enhance its AI infrastructure. For the third quarter, Meta reported adjusted earnings of $7.25 per share, generating $51.24 billion in revenue and exceeding Wall Street predictions. The company experienced a 26% increase in revenue year-over-year, although it faced a substantial $15.93 billion tax charge linked to the implementation of President Donald Trump’s One Big Beautiful Bill Act.