Meta Platforms, the parent company of Facebook, faced a decline in stock value after releasing its third-quarter earnings report. The company reported earnings of $1.05 per share, a significant drop of 83% compared to the same quarter last year. This performance fell short of analysts’ projections, which anticipated earnings of $6.72 per share.
Sales Surge Despite Earnings Decline
In contrast to its earnings woes, Meta’s revenue saw a notable increase. Sales surged by 26%, reaching $51.24 billion. This figure surpassed market expectations, which estimated revenue at $49.51 billion.
Tax Charge Impact on Earnings
The earnings decline was largely attributed to a one-time tax charge of $15.93 billion. The company noted in its news release that this charge was due to the recognition of a valuation allowance against its deferred tax assets, influenced by the U.S. Corporate Alternative Minimum Tax.
Without this tax burden, Meta’s earnings per share would have been $7.25. However, the company expects to see a significant reduction in U.S. federal cash tax payments starting in 2025, thanks to the new One Big Beautiful Bill Act.
Increased Capital Expenditures Guidance
Meta is also adjusting its capital expenditures for the upcoming year, raising its forecast to $71 billion. This figure reflects an increase from the prior estimate of $69 billion. CEO Mark Zuckerberg is focused on investing in data centers and advanced computing infrastructure, positioning Meta as a frontrunner in artificial intelligence.
Capital expenditures are expected to grow by 37% in 2024 and a staggering 90% in 2025. Moreover, Meta anticipates that growth in capital expenditures will be even larger in 2026.
Stock Market Reaction
Following the earnings report, Meta’s stock dropped 7% to $697.83 in after-hours trading, breaking an eight-day winning streak. Despite this recent setback, Meta’s stock has gained approximately 27.7% year-to-date, reflecting its strong performance earlier in the year.
As of Wednesday’s close, the company’s stock was positioned in a newly formed double-bottom base, with a potential buy point set at $790.80.
Outlook for Investors
- Current earnings per share: $1.05
- Expected earnings without tax charge: $7.25
- Q3 sales increase: 26%, totaling $51.24 billion
- Capital expenditures for 2023: $71 billion
- Stock year-to-date increase: 27.7%
