Meta Platforms Inc. shares fell more than 10% Thursday after investors reacted sharply to the company's soaring artificial-intelligence investments, even as its third-quarter results beat expectations with record revenue and earnings.
The social media giant lifted its 2025 capital expenditure forecast to a range of $70 billion to $72 billion, up from prior guidance of $66 billion to $72 billion, as CEO Mark Zuckerberg pledged to accelerate spending on AI infrastructure and research. The move came as Alphabet and Microsoft also expanded their own AI budgets, underscoring the escalating arms race among tech giants to dominate the next generation of computing.
"It's pretty early, but I think we're seeing the returns in the core business," Zuckerberg said during Wednesday's earnings call. "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."
Meta reported adjusted earnings of $7.25 per share on $51.24 billion in revenue, surpassing Wall Street's projections. Revenue grew 26% from the prior year, marking the first time the company crossed the $50 billion quarterly threshold. Despite those results, shares fell as much as 13% in early trading before closing down around 10%, erasing roughly $120 billion in market capitalization.
Investors appeared unsettled by the company's rising costs and long-term ambitions. Meta's capital expenditures more than doubled year-over-year to $19.4 billion in the third quarter, largely driven by data center expansion and hardware development tied to AI. The company's Reality Labs division, home to its virtual and augmented reality products, posted another $4.4 billion loss-bringing its total losses since 2020 to more than $70 billion.
"Being able to make a significantly larger investment here is very likely to be a profitable thing over, over some period," Zuckerberg told analysts, defending the company's decision to "aggressively" build capacity in anticipation of what he described as an era of AI "superintelligence."
Meta has spent heavily to expand its AI ecosystem, including a $14.3 billion investment in startup Scale AI earlier this year. The company also recruited Scale AI CEO Alexandr Wang and former GitHub CEO Nat Friedman to lead its new division, Superintelligence Labs. In parallel, Meta is scaling production of its $799 Ray-Ban Display glasses, which quickly sold out after launch.
Wall Street analysts remain divided on the company's trajectory. "While the ultimate level of investment contemplated this year has increased, we believe the spending has been justified," Wedbush analysts wrote in a note, citing the integration of AI into Meta's advertising and content algorithms. Others were more cautious.
"As impressive as it is to have 3.5 billion daily active users across the Family of Apps, Zuckerberg and CFO Li's commentary really focused on the AI evolution of the company," said Ryan Lee, senior vice president of product and strategy at Direxion. "Next year's spend appears to be daunting investors as it is clear the cash cow of the company, advertising, no longer remains the top priority."
Nat Schindler of Scotiabank noted that Meta "will need to see a bevy of new revenue streams to validate their capex ramp," warning that investor patience could wear thin if those returns don't materialize soon.
