Meta shares drop 9% despite earnings beat as company takes one-time tax charge
by Jonathan Vanian · CNBCKey Points
- Meta shares dropped as much as 9% on Wednesday after the company reported third-quarter earnings that beat on sales, but it also reported a $15.93 billion one-time tax charge.
- Meta said that the implementation of President Donald Trump's One Big Beautiful Bill Act resulted in the one-time, non-cash income tax charge.
- Meta raised the low end of its total expenses for the year by $2 billion, saying expenses will come in between $116 billion to $118 billion. That figure was previously $114 billion to $118 billion.
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Meta shares dropped as much as 9% on Wednesday after the company reported third-quarter earnings that beat on sales, but it also reported a $15.93 billion one-time tax charge.
Here's how the company did, compared with estimates from analysts polled by LSEG:
- Earnings per share: $7.25 adj. vs. $6.69 estimated
- Revenue: $51.24 billion vs. $49.41 billion estimated
Meta said that the implementation of President Donald Trump's One Big Beautiful Bill Act resulted in the one-time, non-cash income tax charge. The company said it expects Trump's law to result in "a significant reduction" in its U.S. federal cash tax payments for the rest of 2025 and future years.
The company's third-quarter sales rose 26% year-over-year, which is its highest revenue growth since the first quarter of 2024.
Meta said it expects fourth quarter revenue to be in the range of $56 billon to $59 billion. The midpoint of that range comes in above what was expected by analysts, according to StreetAccount.
The company raised the low end of its total expenses for the year by $2 billion, saying expenses will come in between $116 billion to $118 billion. That figure was previously $114 billion to $118 billion.
CEO Mark Zuckerberg said Meta consistently requires more computing power for its artificial intelligence initiatives, resulting in more spending on related data center and cloud services.
"That suggests that being able to make a significantly larger investment here is very likely to be a profitable thing over, over some period," Zuckerberg added.
The company also raised its 2025 guidance for capital expenditures, which will now come in the range of $70 billion to $72 billion. It's prior outlook was between the range of $66 to $72 billion.
Meta's Reality Labs hardware unit reported a third-quarter loss of $4.4 billion on $470 million in sales.
Revenue for Reality Labs in the fourth quarter is expected to come in lower than it did for the same period in 2024, Meta finance chief Susan Li said on a call with analysts. Li said that was due to the company not releasing a new VR headset this year and because retailers who bought inventory of Meta's previous headset for the holiday shopping season did so during the third quarter.
"We're still expecting significant year-over-year growth in AI glasses revenue in Q4 as we benefit from strong demand for the recent products that we've introduced, but that is more than offset by the headwinds to the Quest headsets," Li said.
The company in September revealed the $799 Meta Ray-Ban Display glasses, which are Meta's first consumer-ready AI glasses with a built-in display and an accompanying wristband with neural technology. Zuckerberg said the product is sold out and that demo slots are booked through the end of November.
"We're going to have to invest in increasing manufacturing and selling more of those," he said.
The company said that it saw 3.54 billion daily active people across its apps for the quarter, ahead of Wall Street's expectations of 3.5 billion daily active people.
Meta's advertising sales were $50.08 billion during the third quarter, ahead of Wall Street's expectations of $48.5 billion.
The company has spent the year investing heavily in AI, and it conducted a massive overhaul of the organization leading those efforts after the lukewarm debut of its open-source Llama 4 software in April.
Meta said last Wednesday that it would lay off about 600 workers in its Superintelligence Labs AI unit, but it left that group's top-tier TBD Labs unscathed. A day before, Meta said it formed a joint venture agreement with Blue Owl Capital in a deal worth $27 billion to help fund and build a gigantic data center in Richland Parish, Louisiana.
Meta said that its employee headcount was 78,450 as of Sept. 30, representing an 8% year-over-year increase.
The company in September added Vibes to its Meta AI app. That feature is a feed of AI-generated videos. Since Vibes was released, downloads of Meta AI on both iOS and Android are up 56% month-to-month to a total of 3.9 million downloads as of Oct. 18, according to data provided to CNBC by mobile research firm Appfigures.
"Vibes is an example of a new content type enabled by AI, and I think that there are more opportunities to build many more novel types of content ahead," Zuckerberg said.
Correction: Analysts expected Meta revenue to come in at $49.41 billion. That number was misstated in the earlier version of this story.
WATCH: Meta reports Q3 earnings beat, company takes one-time tax charge