Meta’s $15.9 Billion Wake-Up Call: Why the Stock Plunged Despite Strong Growth

The Market Shock

Meta Platforms delivered one of its sharpest post-earnings declines in recent years, falling roughly 11% in early trading after reporting Q3 2025 results.
The numbers looked strong at first glance: revenue up 26% year-over-year to $51.2 billion, daily users topping 3.54 billion, and Reels now at a $50 billion annual run rate.

Yet beneath the surface, two words erased billions in market value: tax expense and capex.

The Tax Shock

Meta reported EPS of just $1.05, far below Wall Street’s $6.67 estimate.
The culprit was a $15.9 billion non-cash tax charge tied to President Trump’s “One Big Beautiful Bill” (OBBB), a sweeping corporate tax reform that reshuffled how multinational profits are taxed.

Without that one-time hit, Meta’s adjusted EPS would have been $7.25, comfortably above expectations.
While the legislation is expected to lower future U.S. tax payments, the immediate accounting effect crushed quarterly profit optics and spooked short-term investors.

The Spending Surge

Alongside the tax hit, Meta raised its 2025 capital expenditure guidance to $70–72 billion, with an even heavier investment cycle projected for 2026.
CEO Mark Zuckerberg said the company plans to “overbuild for the most optimistic AI scenarios, including superintelligence.”

That comment hit Wall Street like a warning flare.
Unlike Microsoft or Alphabet, Meta lacks a cloud computing business to offset heavy AI infrastructure spending. With advertising still its core revenue driver, investors worry about margin compression before those AI bets pay off.

The Big Tech Comparison

All three beat revenue expectations, but Meta’s tax distortion and lack of diversification magnified the sell-off.
The broader trend is clear: AI spending is accelerating. Collectively, Meta, Google, and Microsoft will deploy over $200 billion in AI infrastructure this year alone.

For Meta, that’s a bold reinvestment story. For Wall Street, it’s a profitability problem.

Bull, Bear, and Base Case Outlook for Meta

Reference Price: $663.40 (as of October 30, 2025, 15:24 UTC)

Bull Case $900 (+36%)

Meta monetises its AI infrastructure, layering new high-margin revenue streams on top of its dominant ad business. CapEx growth moderates by 2026, margins recover, and investors re-rate the stock for optionality in AI compute + ads.

Bear Case $500 (-25%)

CapEx remains elevated without corresponding monetisation. Ad growth decelerates, margins shrink, and the Market treats Meta as a mature ad business rather than an AI leader. Valuation compresses accordingly.

Base Case $750 (+13%)

Advertising remains strong, and AI investments begin showing incremental returns by late 2026. CapEx is high but manageable. Meta is viewed as a dominant ad platform with meaningful upside from AI, but not the full “supercomputer” payoff yet.

Summary of Analyst Price Target Changes

Overall sentiment: Mostly Buy/Overweight, with modest target cuts following Q3 results. A few firms raised targets slightly.

Consensus View

• Average New Target: ≈ $865/share

• Overall Tone: Slightly cautious but still bullish

• Consensus Rating: Remains Buy/Overweight across major institutions

• Trend: Most firms trimmed targets to reflect higher capex and near-term margin pressures, though long-term AI and advertising growth outlook remains intact.

A Temporary Dip or Structural Reset?

Meta’s core ad engine remains solid, its user base remains unmatched, and its AI-driven engagement continues to improve. The company has recovered from past drawdowns, most notably in 2022, when shares fell by more than 70% before tripling in the rebound.

Still, this episode is a reminder that markets price patience differently across companies. Microsoft and Google can fund AI from diversified cash flows. Meta, for now, must build its future from ad dollars.

That trade-off may unsettle short-term holders, but for long-term observers, it’s a window into how Big Tech is rewriting the cost of leadership in the AI era.

Portfolio Parrot Take

Meta’s ability to attract $125B in demand after a brutal post-earnings sell-off is a powerful vote of confidence from the bond market. While equity investors panicked, debt investors doubled down, suggesting that Meta’s fundamentals and cash flows remain rock-solid beneath the market noise.

Disclaimer: This publication is for general information and educational purposes only and should not be taken as investment advice. It does not take into account your individual circumstances or objectives. Nothing here constitutes a recommendation to buy, sell, or hold any investment. Past performance is not a reliable indicator of future results. Always do your own research or consult a qualified financial adviser before making investment decisions. Capital is at risk.