Meta shares sank on the release of Q3 earnings, despite the tech giant beating estimates, as investors fretted about rising AI-related costs.
Revenue for the period was $51.24 billion, an increase of 26% year-over-year and higher than the $49.41bn analysts had predicted.
Meta shares were down 8% in the US premarket.
However, the decline in shares was not a fair reflection of the group’s underlying progress on key metrics. Core measures, such as average price per ad and the number of users, all showed strength.
Unfortunately, higher revenues and better performance were masked by a one-off tax charge of $15bn, which led to an 83% drop in net income for the period.
There were also concerns around higher spending and costs. Costs and expenses rose 32% to an eyewatering $30bn as the firm ramped up spending on AI.
“Meta’s quarter highlighted a familiar tension: strong user engagement versus rising costs. The company’s platforms continue to see impressive activity, helped by AI-driven improvements, but investors focused on two negatives – lower growth for the next quarter and a sharp increase in spending plans,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“Zuckerberg is betting heavily on AI infrastructure, which means profits will likely come under pressure in the near term. He argues this is essential to secure a bigger long-term opportunity, but the trade-off is clear: higher costs now for uncertain future gains. For some, that’s a reasonable risk; for others, it’s a concern given how much control rests with one person.”