Mark Zuckerberg’s Meta said it would “aggressively” ramp up spending to stay competitive in the AI arms race, sending its stock down more than 10 percent in morning trading despite posting record revenue in the third quarter.
The Wall Street Journal reports that Mark Zuckerberg’s Meta reported record revenue of $51.2 billion in the third quarter, a 26 percent year-over-year increase, but warned that capital expenditures around AI are likely to accelerate significantly next year. The company also reported a surprise one-time tax charge of $15.9 billion that dragged down its net income to $2.7 billion, far below analysts’ expectations. The tax charge was attributed to an accounting adjustment to reflect future tax liability, resulting from the One Big Beautiful Bill Act.
On a call with analysts and investors, Meta Chief Executive Mark Zuckerberg said the acceleration in spending was necessary to support the company’s pursuit of superintelligence, or AI that vastly outperforms human capabilities. Zuckerberg added that if superintelligence arrives sooner, Meta will be ideally positioned for a generational paradigm shift in many large opportunities. If it takes longer, the company will use the extra compute to accelerate its core business.
Zuckerberg told investors the upside of his AI investments are high:
The upside is extremely high both for our existing apps and new products and businesses that are becoming possible to build. Across Facebook, Instagram, and Threads, our AI recommendation systems are delivering higher quality and more relevant content, which led to 5% more time spent on Facebook in Q3 and 10% on Threads. Video is a particular bright spot, with video time spent on Instagram up more than 30% since last year. As video continues to grow across our apps, Reels now has an annual run rate of over $50 billion.
Analysts expressed concerns about the lack of clarity on the return on investment for Meta’s aggressive AI spending. Brian Mulberry, who manages a portfolio at Zacks Investment Management that includes Meta stock, said the company needs to do a better job of showing when the investments will come back to the balance sheet. While his firm will continue to hold Meta stock, they are hesitant to add more to their position at the moment.
Over the summer, Meta rebranded its AI division, creating new teams, hiring top talent from other elite labs, and giving the unit a new goal of superintelligence. The company also acquired a 49 percent stake in data-labeling startup Scale AI and hired its CEO and several employees. However, last week, Meta laid off roughly 600 employees in the AI division, though the team housing many of the new hires was not affected.
In its earnings release, the company wrote:
We are at an exciting point for our company, where we have continued runway to improve our core services today as well as the opportunity to build new AI-powered experiences and services that will transform how people engage with our products in the future. We expect the set of investments we are making within our ads and organic engagement initiatives next year will enable us to continue to deliver strong revenue growth in 2026, while our progress on AI models and products will position us to capitalize on new revenue opportunities in the years to come.
Read more at the Wall Street Journal here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
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