Meta is diving headfirst into the AI arms race, and Wall Street isn’t thrilled. Despite reporting record third-quarter revenue of $51.2 billion—a 26% jump from the previous year—Meta’s stock plunged over 10% in early trading as the company warned of rapidly accelerating capital expenditures related to artificial intelligence.
CEO Mark Zuckerberg told investors that Meta is ramping up spending to stay competitive in the development of “superintelligence”—AI that could eventually surpass human capabilities. He acknowledged that the timeline for such breakthroughs is uncertain but insisted that Meta’s position will be strategic whether AI advances rapidly or slowly. Zuckerberg said the investment is “extremely high upside” across existing platforms like Facebook, Instagram, and Threads, noting that AI-powered recommendations have already boosted user engagement. Video remains a key growth area, with Instagram video views up over 30% year-over-year and Reels generating over $50 billion in annualized revenue.
However, the optimism didn’t calm investor nerves. A surprise $15.9 billion one-time tax charge—related to the One Big Beautiful Bill Act—slashed net income to $2.7 billion, far below analyst expectations. This tax adjustment, combined with vague timelines on when AI investments will produce returns, triggered skepticism from market analysts. Portfolio manager Brian Mulberry, whose firm holds Meta shares, said he’s cautious about expanding that position until Meta offers more transparency on the payoff timeline.
Adding to the confusion, Meta laid off about 600 employees from its AI division just last week, despite recently rebranding the unit, hiring top talent, and acquiring nearly half of Scale AI, a data-labeling firm. While the layoffs didn’t hit the team focused on superintelligence, they raised questions about internal consistency in Meta’s AI strategy.
In its earnings release, Meta claimed it is well-positioned to enhance its current services and roll out new AI-driven features that will “transform how people engage” with its platforms. The company believes these investments will fuel strong revenue growth by 2026. But for now, Wall Street appears wary of the risks tied to chasing AI dominance while burning billions in the process.
