Meta's Q3 Profit Plunges 83% Amid $15.93 Billion Tax Charge and Escalating AI Investments

MENLO PARK, Calif. – Meta Platforms reported a significant 83% decline in its third-quarter 2025 net profit, falling to $2.71 billion, primarily due to a substantial $15.93 billion one-time tax charge. This financial impact occurred despite the company achieving robust revenue growth of 26% year-over-year, reaching $51.24 billion. The earnings report, released on October 29, 2025, also highlighted Meta's aggressive increase in AI-related capital expenditures, which has prompted investor concern regarding near-term profitability.

The considerable tax charge stems from new U.S. tax regulations under the "One Big Beautiful Bill Act," which necessitated Meta to record a valuation allowance against its U.S. federal deferred tax assets. This accounting adjustment, while crushing reported profit for the quarter, is a non-cash event and is expected to result in lower cash taxes in future periods, as explained by company officials. Excluding this charge, Meta's net income would have been $18.64 billion, with diluted earnings per share of $7.25.

Meta's guidance signaled a substantial increase in AI capital expenditure, with forecasts of $70 billion to $72 billion for 2025 and even higher spending projected for 2026. Management also raised the total expense guidance for 2025 to $116 billion–$118 billion, indicating that significant investments in data centers, chips, and talent are expected to compress margins until new AI products achieve monetization at scale. CEO Mark Zuckerberg emphasized the strategic importance of these investments, stating, "I think that it's the right strategy to aggressively front-load building capacity, so that way we're prepared for the most optimistic cases."

Further contributing to the financial pressure, Meta's Reality Labs division reported a quarterly operating loss of $4.4 billion, continuing a trend of multi-year cumulative losses. This segment, responsible for virtual and augmented reality hardware and software, has accumulated over $70 billion in losses since late 2020. Despite this, the company's core advertising engine demonstrated strong performance, with ad impressions across its family of apps increasing by 14% and the average price per ad rising by 10% year-over-year.

Investors are closely scrutinizing the trade-off between Meta's substantial AI investments and its near-term profitability, as the market re-evaluates the company's valuation until clearer evidence emerges that these AI initiatives will significantly boost engagement, ad yield, or generate new revenue streams. The stock experienced a 10% drop following the earnings announcement as these heightened spending plans overshadowed the otherwise strong revenue figures.