Meta stock sinks after tax hit weighs on earnings, company touts 'notably larger' AI investments in year ahead

Core Insights - Meta reported Q3 earnings that exceeded revenue expectations but fell short on earnings per share due to a one-time tax-related charge and increased capital expenditures related to AI investments [1] - Following the earnings report, Meta's stock dropped over 7% in premarket trading [1] Financial Performance - For Q3, Meta's earnings per share were $1.05, while revenue reached $51.24 billion, surpassing the anticipated revenue of $49.6 billion but missing EPS expectations of $6.72 [4] - Family of apps revenue was $50.77 billion, exceeding the forecast of $48.6 billion [5] Capital Expenditures and Investments - Meta is significantly increasing its capital expenditures estimates for 2025 to a range of $70 billion to $72 billion, up from a previous estimate of $66 billion to $72 billion [3] - The company has invested $14.3 billion in Scale AI and is constructing a new data center in El Paso, Texas, with an investment of at least $1.5 billion [2] - Meta has entered a $27 billion financing deal with Blue Owl Capital for its Hyperion data center in Louisiana and is actively hiring AI experts from competitors [2] Future Outlook - Meta anticipates that total expenses will grow at a faster rate in 2026 compared to 2025, driven by infrastructure costs and employee compensation, particularly for AI talent [4] - The CFO indicated that capital expenditures growth will be notably larger in 2026 than in 2025 [3] Competitive Position - Meta's stock has increased by 27% year-to-date and 26% over the past 12 months, although this lags behind Google's 43% year-to-date increase and 60% rise over the last year [6] - Unlike competitors such as Amazon, Google, and Microsoft, which are selling AI solutions to enterprises, Meta is leveraging AI to enhance its advertising business and user engagement [5]