Meta Platforms experienced a significant drop in its stock price, falling by as much as 7% after reporting mixed earnings. While the social media giant, which owns Facebook and Instagram, reported strong revenue of $51.24 billion, a 26% year-over-year increase and $1.8 billion above analyst estimates, it missed its GAAP earnings per share (EPS) estimate by $5.66, reporting $1.05. This miss was attributed to a "one-time, non-cash income tax charge of $15.93 billion." The company anticipates paying substantially less tax in the fourth quarter.
Adding to investor concerns, analysts at Wolfe Research project Meta's capital expenditures (capex) to increase significantly, reaching $200 billion in 2027, up from previous estimates of $160 billion. This increased spending, largely to support AI initiatives and data center infrastructure, may necessitate a capital raise. Despite these costs, the AI market is expected to exceed $500 billion for the first time this year, presenting a substantial new revenue opportunity for Meta.
Meta's stock decline followed a broader trend with other tech giants; Microsoft also saw its shares sink despite beating its revenue consensus, while Alphabet rallied. Investors are scrutinizing Meta's aggressive spending on AI, even as these investments contribute to strong advertising business performance. The company’s forecast of third-quarter revenue between $47.5 billion and $50.5 billion initially sent shares up 11% earlier, beating analyst estimates of $46.15 billion, with profit per share of $7.14 for the second quarter also surpassing estimates of $5.92. However, rising costs and regulatory challenges, including antitrust lawsuits, continue to raise questions for investors.
