Negative news hit the U.S. earnings season as Meta Platforms, Inc. (META) saw its shares plummet over 9% in pre-market trading on Thursday following disappointing financial results. The company reported an 83% year-over-year drop in Q3 net profit, largely due to a one-time non-cash tax expense of $15.93 billion tied to U.S. tax reforms.

Investors are increasingly skeptical about the returns from the AI infrastructure arms race among tech giants. Meta, Alphabet (GOOGL), and Microsoft (MSFT) collectively spent approximately $78 billion in capital expenditures last quarter—an 89% surge from the previous year. Microsoft’s shares also dipped over 3.5% pre-market.

**Mega-Cap Meltdown** Meta’s Q3 revenue rose 26% to $51.24 billion, but net profit cratered to $2.71 billion ($1.05 per share), far below the $6.68 consensus. Excluding the tax hit, adjusted EPS stood at $7.25, beating estimates. CEO Mark Zuckerberg noted the tax reform would reduce future U.S. federal cash taxes but warned of rising costs, lifting Meta’s full-year expense forecast to $116–118 billion.

CFO Susan Li flagged "significantly higher" 2026 capex, driven by AI-driven data center and cloud investments. Regulatory risks in Europe and U.S. youth-related lawsuits also loom, potentially denting growth.

Despite ad impressions climbing 14% and prices rising 10%, Meta’s costs soared 32% YoY, squeezing operating margins to 40% from 43%. Q4 revenue guidance of $56–59 billion met expectations, but margin pressures weighed on sentiment.

**AI Spending Spree** The tech titans are doubling down on AI infrastructure, with Alphabet raising its 2025 capex outlook to $91–93 billion—its second hike this year. CFO Anat Ashkenazi cited "significant increases" ahead, fueled by Google Cloud’s $155 billion backlog (+46% QoQ).

Microsoft posted a record $34.9 billion in Q1 capex, overshooting estimates, as CFO Amy Hood acknowledged unrelenting AI demand: "We’re investing to capture future opportunities."

Analysts question whether the AI gold rush will pay off. Bernstein’s Mark Moerdler pressed Microsoft on returns, asking if the sector is in a bubble. Hood countered that even massive investments haven’t kept pace with "multi-geography" demand growth.

The spending spree reflects a high-stakes bet on AI dominance—but with profitability timelines uncertain, investor patience is wearing thin.