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Investing.com -- Meta Platforms posted a steep drop in quarterly profit after taking a $15.9 billion non-cash tax charge, as the Facebook- and Instagram-owner outlined plans to "aggressively" push up its investments in artificial intelligence.
Shares in the social media giant fell more than 12% in early U.S. trading on Thursday.
Third-quarter earnings dropped to $1.05 per share from $6.03 a year earlier, due in large part to the tax charge, which was related to U.S. President Donald Trump’s signature budget bill. Excluding the expense, Meta’s operating margin was 40%.
Meta also warned of potential regulatory risks in the European Union and the United States, including possible restrictions on its advertising products and ongoing youth-related lawsuits.
"We continue to monitor active legal and regulatory matters, including the increasing headwinds in the EU and the U.S. that could significantly impact our business and financial results," the company said in the statement.
Revenue rose 26% to $51.24 billion, topping analyst estimates of $49.36 billion, driven by strong advertising demand. Advertising sales grew to $50.1 billion, while daily active users across its family of apps climbed 8% to 3.54 billion in September.
The company forecast fourth-quarter revenue between $56 billion and $59 billion, roughly in line with market expectations.
It raised its full-year expense outlook to $116 billion–$118 billion, up from a prior range of $114 billion–$118 billion, and lifted its capital spending forecast to $70 billion–$72 billion saying there was greater infrastructure requirements to support AI development.
Meta said it expects both capital expenditures and total expenses to grow “at a significantly faster rate” in 2026 as it expands compute capacity and hires more technical staff. CFO Susan Li said the higher spending will be driven mainly by infrastructure and cloud costs, along with increased compensation for AI talent.
CEO Mark Zuckerberg said Meta’s AI initiatives, including its push to build out a system which can surpass human intelligence, were gaining traction.
"[W]hile this type of commentary has become standard issue for the hyperscalers, we believe investors are likely to shift back toward more heavily scrutinizing these investments (questioning near-term and long-term return on invested capital)," analysts at Stifel said in a note.
The results come as some technology executives, investors and analysts have begun to raise concerns that the heavy spending -- not just at Meta, but at other mega-cap tech players as well -- could inflate a possible AI bubble reminiscent of the dotcom boom in the 1990s.
(Scott Kanowsky contributed reporting.)