Meta stock tumbles despite solid Q3 earnings beat

Core Insights - Meta reported strong third-quarter earnings with earnings per share at $7.25, exceeding analyst expectations of $6.69, and revenues surpassing $50 billion for the first time [1] - Despite the strong earnings, Meta's stock is expected to drop by 8% to 9% due to rising capital expenditures, which more than doubled to $19.4 billion and are projected to reach $72 billion this year [2] Financial Performance - The company's Reality Labs division incurred a loss of $4.4 billion in the third quarter, contributing to total losses exceeding $70 billion since 2020 [3] - Fourth-quarter revenues for Reality Labs are anticipated to be lower than 2024 projections due to the absence of a new VR headset [3] Capital Expenditures and AI Investment - A significant portion of capital expenditures is directed towards AI initiatives, with CEO Mark Zuckerberg indicating that more power will be needed as the company pursues AI superintelligence [4] - Meta plans to increase investment in manufacturing AI glasses following the sellout of the initial batch of $799 Meta Ray-Ban Display glasses [4] Analyst Perspectives - Analysts generally support Meta's increased spending, citing the integration of AI capabilities into the company's advertising and content recommendation systems as beneficial for Meta's Family of Apps and Reality Labs [5] - Some analysts express concern that the focus on AI may detract from the company's current profitable advertising business [6] - Observations indicate that while Meta has 3.5 billion daily active users, the emphasis on AI evolution may overshadow the importance of advertising revenue, which is seen as the company's cash cow [7]