Meta’s AI Spending Spree Sinks Shares Despite Strong Earnings

Meta Platforms delivered a financial report that presented investors with a tale of two stories: robust underlying profitability clouded by massive future spending commitments. The company revealed that it expects total expenses to significantly increase in 2026, maintaining historic levels of investment in data centers and other equipment to fuel its artificial intelligence ambitions. This announcement triggered an immediate negative market reaction, with shares declining in extended trading as investors digested the implications of sustained heavy capital expenditure.

The third-quarter results showed net income of $2.71 billion, but this figure included a substantial one-time, non-cash income tax charge of $15.9 billion resulting from the implementation of the tax bill signed into law in July. Without this accounting charge, Meta’s net income would have increased 19% to $18.6 billion, demonstrating the underlying strength of the company’s core advertising business. The contrast between the strong operational performance and the market’s negative reaction highlights investor concerns about the cost of Meta’s AI transformation.

The $15.9 billion tax charge represents one of the largest single accounting impacts from recent US tax legislation, significantly distorting Meta’s third-quarter financial picture. This non-cash charge, while substantial, doesn’t affect the company’s operational cash flow but does reflect the changing regulatory environment for US corporations. The implementation of this tax bill has created significant accounting complexities for major technology companies like Meta Platforms operating in the United States.

When excluding this one-time tax impact, Meta’s financial performance tells a different story. The adjusted net income of $18.6 billion represents a healthy 19% year-over-year increase, showcasing the company’s ability to generate substantial profits from its social media and advertising ecosystems. This underlying strength provides the financial foundation that enables Meta to pursue its aggressive AI investment strategy, though investors remain cautious about the timeline for returns on these substantial capital outlays.

The immediate market response to Meta’s earnings announcement was decidedly negative, with shares dropping in extended trading despite the strong adjusted earnings figures. This reaction underscores investor concerns about the company’s commitment to maintaining historic spending levels through 2026, particularly as the timeline for meaningful returns from AI investments remains uncertain. The decline reflects broader market skepticism about whether the massive capital expenditures will translate into sustainable competitive advantages and revenue growth.

Industry experts from Bloomberg News and wealth management firms have been closely analyzing the implications of Meta’s strategic direction. Bloomberg News Senior Technology Reporter Kurt Wagner joined Bloomberg Businessweek Daily to discuss the earnings report and spending outlook, while Brooke May, Managing Partner at Evans May Wealth, provided additional perspective on today’s tech earnings environment. Both experts spoke with Carol Massar and Tim Stenovec about the broader implications for the technology sector and investor sentiment toward companies making substantial long-term bets on artificial intelligence infrastructure.

The expert commentary highlights the central dilemma facing Meta Platforms and other technology giants: balancing near-term shareholder returns against long-term strategic investments in emerging technologies. As companies like Meta continue to allocate billions of US Dollars toward AI infrastructure, including data centers and specialized computing equipment, investors must weigh the potential for future market dominance against the certainty of near-term expense growth and margin pressure.