Meta’s Higher Spending In Pursuit of AI Payoff Shakes Investors

Mark Zuckerberg pledged that Meta Platforms Inc. will spend even more aggressively on artificial intelligence in the year ahead, raising fresh concerns from investors who drove the stock down on worries the company may not have an obvious return on the massive investment.

Zuckerberg on Wednesday signaled an unsatiated appetite for more computing resources as Meta seeks to ensure it's an industry leader in a fast-moving AI race.

“We want to make sure we're not underinvesting,” he said on a conference call after Meta released its third-quarter results and announced that capital expenditures would be “notably larger” next year than in 2025, when it expects to spend as much as $72 billion. 

Zuckerberg and Meta Chief Financial Officer Susan Li spent much of the call suggesting that Meta's AI investments are paying off now — and will in the future — by helping the company better target ads and content. Revenue rose 26% to $51.2 billion in the third quarter, signaling that Meta's core advertising business, which generates about 98% of that revenue, remains strong.

In the current period, Meta projected revenue will be $56 billion to $59 billion. Analysts, on average, estimated $57.4 billion, according to data compiled by Bloomberg. 

The Meta CEO wasn't concerned that the social media company may build more data centers and computing capacity than it needs for its AI ambitions, even though it doesn't have a cloud services business like rivals Microsoft Corp. and Alphabet Inc.'s Google. If Meta develops too much computing power, he said, the excess capacity could improve the core business or it will find a way to sell it. Zuckerberg's bigger point: “I think that it's the right strategy to aggressively front-load building capacity.” 

In the face of Zuckerberg's comments, many Wall Street analysts were leery about the possibility of overspending. The shares of Menlo Park, California-based Meta declined about 8% in extended trading after closing at $751.67. The stock drop signaled a shift in optimism from investors about the relentless spending: Meta shares had gained 28% this year through the close.

“Meta's earnings reveal the growing tension between the company's massive AI infrastructure investments and investor expectations for near-term returns, with rising spending on artificial intelligence capabilities weighing on sentiment despite solid underlying business performance,” Jesse Cohen, a senior analyst at Investing.com, said in an email. 

That tension was evident on the earnings call, with one analyst saying to Zuckerberg that there were “obviously” some concerns on the investment. 

And yet, this year's spending spree isn't poised to stop. Meta said its capital expenditures for 2025 will be $70 billion to $72 billion, slightly raising the lower end of its previous outlook of $66 billion to $72 billion. So far this year, Meta has clocked $50 billion in capital expenditures, signaling more investment to come. 

Li said total expenses will also “grow at a significantly faster percentage rate in 2026 than 2025.” She attributed the increasing costs to future infrastructure spending and the needs of Meta Superintelligence Labs. 

Zuckerberg commentary on spending has looked even further out. Speaking at a dinner President Donald Trump hosted for tech executives in September, the Facebook founder said that he expects the company to spend at least $600 billion in the US through 2028. Later that evening, Zuckerberg was caught on an open microphone telling Trump, “I wasn't sure which number you wanted to go with.”

Li shortly thereafter clarified at a conference that the $600 billion figure refers to the company's projections for total US spending this year through 2028, including on infrastructure, talent and other operations.

Some analysts cautioned that the spending comments cast a shadow on what has otherwise been a thriving business. 

“Unfortunately, Meta's strong revenue and user growth in Q3 is tainted by significantly increased costs across the board,” Mike Proulx, an analyst at Forrester, said in a note, also noting a streak of losses from Meta's AI-enabled hardware unit known as Reality Labs. 

Reality Labs reported a $4.4 billion operating loss in the third quarter, while bringing in $470 million in sales. The company also said that it expects lower year-over-year revenue from the unit in the fourth quarter, partially due to retail partners procuring its Quest virtual reality headsets during the current quarter to prepare for the holiday season. Li said the company expects sales of its AI-enabled glasses, such as the Ray-Ban Metas, to increase even as the Quest headsets face a slowdown. 

The company also reported third-quarter net income of $2.71 billion, which included a one-time, non-cash income tax charge of $15.9 billion due to the implementation of the tax bill signed into law in July, Meta said in the statement. Without the accounting charge, Meta said net income would have increased 19% to $18.6 billion.

Looking beyond the third quarter, the company said it expects a “significant reduction” in US federal cash tax payments for 2025 and years to come due to the new law.