Meta’s Bold AI Bet Sends Shares Tumbling

Meta Platforms delivered a stunning revenue surge of 26% in its latest quarter, yet investors responded by sending the stock sharply lower. The dramatic divergence between top-line performance and market reaction stems from an 83% profit collapse and massive artificial intelligence investment plans that are stirring uncomfortable memories of the company's costly Metaverse ventures. The central question facing shareholders is whether Meta is embarking on its next transformative growth chapter or heading toward another financial quagmire.

What truly unsettled Wall Street was Meta's announcement of plans to invest at least $70 billion in artificial intelligence capabilities during 2025, with management projecting "significantly higher" expenditures for 2026. This aggressive spending blueprint evokes difficult memories of the company's Reality Labs division, which continues to hemorrhage cash with $4.4 billion in losses last quarter alone. Many investors now worry that history may be repeating itself, with billions flowing into another project whose profitability timeline remains uncertain.

Strong User Metrics Amid Profit Plunge

At first glance, the quarterly results appeared robust, with revenue climbing to $51.2 billion. The shocking element came from net income, which plummeted to $2.7 billion. However, this dramatic decline was primarily driven by an exceptional tax charge exceeding $15.9 billion. When adjusting for this one-time factor, earnings per share reached $7.25, surpassing analyst expectations. The core business operations are performing considerably better than headline numbers might suggest.

The advertising division continues to demonstrate remarkable strength, with several key metrics showing positive momentum:

Should investors sell immediately? Or is it worth buying Meta?

• Daily active users across all platforms increased by 8% to reach 3.54 billion
• The average price per advertisement rose by 10%
• Revenue per user hit its highest level in two years

Meta's enhanced utilization of AI for advertisement optimization is already yielding benefits, delivering improved targeting capabilities and greater efficiency for advertisers. These results confirm that the company's fundamental ability to monetize its massive user base remains firmly intact.

Technical Picture Darkens

The market's verdict has been unequivocal. Since reaching its autumn peak, Meta shares have declined by more than 20%, with persistent selling pressure indicating that investors currently prioritize capital discipline over speculative future projects. The parallels to the Metaverse investment strategy are too apparent for many market participants – another multibillion-dollar experiment lacking a clear pathway to profitability.

The contrasting narratives of strong current operations versus uncertain future returns have created a significant divergence between Meta's business performance and its stock valuation. As the company accelerates spending on artificial intelligence infrastructure, investors appear increasingly concerned that shareholder returns may be sacrificed at the altar of technological ambition.