Meta Stock Plunges as Profits Take $16B Tax Hit From Trump's 'One Big Beautiful Bill'

Meta Platforms' Q3 earnings per share of $1.05 significantly missed analyst estimates, primarily due to a $15.93 billion one-time tax charge, leading to a 9% stock decline in extended trading. Despite this, revenue surged 26% to a record $51.24 billion, surpassing projections. The company also raised its capital expenditure forecast for AI infrastructure to $70-$72 billion, marking the third increase this year, which continues to raise investor scrutiny regarding the returns on these substantial investments.

Analysis

Meta Platforms reported Q3 EPS of $1.05, an 85% year-over-year decline, significantly missing analyst estimates of $6.70 due to a substantial $15.93 billion one-time tax charge. Excluding this charge, EPS would have been $7.25, surpassing expectations. This tax-related earnings miss led to a 9% decline in META shares during extended trading.

Despite the EPS miss, Meta's Q3 revenue surged 26% year-over-year to a record $51.24 billion, exceeding analyst projections. Concurrently, the company raised its capital expenditure forecast for AI infrastructure for the third time this year, now projecting $70-$72 billion, which has reportedly alarmed investors regarding the return on these significant investments.

Looking ahead, Meta provided Q4 revenue guidance of $56-$59 billion, which is ahead of consensus estimates, and anticipates a significant reduction in U.S. federal cash tax payments from 2025 onwards. This forward-looking positive guidance, coupled with strong underlying revenue growth, presents a nuanced picture despite the immediate negative market reaction to the one-time tax impact and increased capex.

Key Decisions for Investors

• Investors should distinguish the one-time $15.93 billion tax charge from Meta's robust 26% year-over-year revenue growth, which exceeded expectations.
• Closely monitor Meta's escalating capital expenditures for AI, assessing future guidance for evidence of return on investment given investor concerns.
• Consider the positive implications of Meta's Q4 revenue guidance exceeding consensus and the projected significant reduction in federal cash tax payments from 2025.