Meta’s Drop Looks Overdone – AI Spending Today, Growth Tomorrow
Meta Platforms (META) reported impressive Q3 2025 results — but the market didn’t seem to care. Despite beating expectations across the board, shares fell over 10% after hours, their biggest drop since 2022. The reason? Higher-than-expected AI spending.
Revenue jumped 26% year-over-year to $51.2 billion, its fastest growth in a year and a half, driven by a 10% rise in ad prices and 14% more ad impressions. Adjusted EPS came in at $7.25 versus the $6.71 consensus, showing that Meta’s core business remains incredibly profitable. Across its family of apps, monthly active users climbed to 3.54 billion, with Instagram and Threads both reporting double-digit engagement growth.
Yet investors focused on guidance. Management raised 2025 capital expenditures to between $70 billion and $72 billion, with spending expected to rise even more in 2026 as Meta builds AI infrastructure. CEO Mark Zuckerberg defended the move, saying the company must “build capacity ahead of superintelligence breakthroughs.”
It’s true that Meta lacks a cloud business like Microsoft or Google, meaning most of these costs are for its own AI development — powering advertising, recommendations and generative content tools across its platforms. Reality Labs remains a drag, losing $4.4 billion in the quarter, but Meta’s core operations easily absorb those losses, with ad revenue surpassing $50 billion for the period.
From a valuation standpoint, Meta trades around 22–23 times forward earnings, in line with its five-year average, yet analysts see earnings per share climbing from $23.86 in 2024 to $39.12 by 2029 — about 10% annualised growth. The average price target sits near $870, well above the current ~$650 level.
In my view, this pullback looks temporary. Meta is still one of the world’s most profitable tech companies, generating enormous free cash flow while investing heavily in AI innovation that’s already improving engagement and ad performance. The fundamentals remain strong, the management is disciplined, and the upside is real.
This isn’t panic — it’s opportunity.
#META #NVIDIA #SPY #QQQ #APPL... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
META will rebounce soon
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It will tank a little more
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