Meta Platforms, Inc. (META.US) shares plunged 11.3% by Thursday's close, extending Wednesday's after-hours decline, with its market capitalization now at approximately $1.68 trillion. The social media and AI giant reported an 83% year-over-year drop in Q3 net profit to $2.71 billion, impacted by a $15.93 billion one-time tax expense under the U.S. OBBBA tax legislation. While AI continues to drive digital advertising revenue growth, CEO Mark Zuckerberg's aggressive investment strategy has unsettled Wall Street.
Despite investor enthusiasm about Meta's dual focus on developing cutting-edge AI models and pioneering smart glasses technology, analysts express growing concerns over ballooning capital expenditures. Several institutions have trimmed their 12-month price targets, though maintaining bullish ratings. Meta now forecasts 2025 capital expenditures between $70-$72 billion (up from prior $66-$72 billion guidance), primarily allocated to AI infrastructure including Nvidia GPU clusters, data centers, and proprietary AI chips. Total 2026 spending is projected to accelerate at a "significantly higher percentage rate" as the company pursues AI supremacy.
The company's "Superintelligence Labs" aims to build the world's most advanced AI models and applications, supported by massive new AI-optimized data centers featuring liquid cooling and high-performance networking infrastructure. Meanwhile, Meta's smart glasses initiative represents Zuckerberg's bet on displacing smartphones with AI-powered wearables, challenging Apple's (AAPL.US) dominance in consumer electronics. The CEO envisions AR glasses evolving into always-on AI assistants that could eventually replace smartphones as primary digital interfaces.
Wall Street reactions were mixed: - Oppenheimer downgraded Meta to "Market Perform," citing parallels between current AI spending and its costly metaverse investments during 2021-2022. - Bernstein maintained a "Buy" but cut its target to $870 (15.7% upside), acknowledging strong ad growth but expressing deja vu about rising investments. - Citi retained its "Buy" rating while slashing its target to $850 (13.1% upside), admitting it underestimated Meta's AI spending scale. - Truist stayed constructive ($875 target, 16.4% upside), highlighting market share gains in digital advertising through AI-powered tools. - Piper Sandler called the selloff a buying opportunity ($840 target, 11.8% upside), praising operational execution despite profit pressure. - Bank of America maintained "Buy" with an $810 target (7.8% upside), noting AI product catalysts could drive engagement. - Seeking Alpha analysts upgraded Meta to "Buy," calling the valuation attractive at 23x 2026 P/E—the cheapest among "Magnificent Seven" tech giants—with 16% projected 5-year CAGR returns.
While near-term profitability faces pressure from accelerated investments, analysts generally agree Meta's core advertising business remains robust, with Q3 revenue growing 26% YoY. The company expects reduced tax burdens post-2025 following the one-time OBBBA impact, potentially offsetting some expenditure pressures.