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Meta Platforms (META) comfortably beat Q3 EPS and revenue expectations, posting its strongest revenue growth since 2021. However, a substantial $15.9 bln non-cash income tax charge weighed on GAAP EPS and the stock post-earnings. The company maintained in-line Q4 guidance, projecting steady ad growth but slower Reality Labs revenue as Quest headset demand was pulled forward. META also raised FY25 spending plans and warned of even heavier investments in AI and infrastructure next year.

• The $15.9 bln tax charge, resulting from US tax law changes that reduced META’s deferred tax assets, cut GAAP EPS to $1.05 and weighed on post-earnings sentiment. Management expects the new law will provide substantial cash tax benefits going forward.
• Core Q3 results showed advertising revenue jump 25.5% to $50.1 bln, driven by a 14% increase in ad impressions and a 10% rise in price per ad. META’s advanced AI models and automation (e.g., Lattice, Andromeda, Advantage+) continue to bolster ad targeting, performance, and conversion rates.
• AI-powered recommendation systems are boosting time spent and engagement on Facebook, Instagram, and Threads, supporting sustained momentum in ad yields and advertiser demand.
• META issued in-line Q4 revenue guidance of $56–$59 bln, reflecting strong ad growth but lower Reality Labs revenue due to lapping last year's Quest 3S launch and pull-forward buying by retailers for the holidays.
• FY25 total expense guidance was raised to $116–$118 bln (prior: $114–$118 bln), with capex now seen at $70–$72 bln (prior: $66–$72 bln). META anticipates notably larger capex growth in 2026, with expense growth to accelerate further, mainly driven by infrastructure, cloud, and depreciation costs.

Briefing.com Analyst Insight:

META’s Q3 results reflect a powerful validation of its AI-driven strategy, with advertising revenue growth fueled by advanced AI ranking systems and strong user engagement. While the significant non-tax charge pressures GAAP EPS, the underlying business momentum remains robust, supported by rapid adoption of new AI tools like Vibes and continued strength across its Family of Apps. The company’s aggressive CapEx guidance increase underscores the commitment to scaling AI infrastructure but also raises questions about return on investment and margin pressure in the near term. The bottom line is that META's underwhelming in-line revenue guidance, coupled with expectations of significantly higher expenses and capex, is weighing heavily on the stock today.