Meta reported its Q3 earnings on October 29.

During the earnings call, Meta CEO Mark Zuckerberg said:

“More than a billion monthly actives already use Meta AI, and we see usage increase as we improve our underlying models. I’m very excited to get a frontier model into Meta AI, and I think that the opportunity there is very large.”

He also commented on the successful launch of Meta’s first Ray-Ban glasses with a high-resolution display and the Meta Neural Band.

They sold out in almost every store within 48 hours, with demo slots fully booked through the end of next month. We are going to have to invest in increasing manufacturing and selling more of those.

Meta CEO Mark Zuckerberg

New Meta Ray-Ban glasses sold out in almost every store within 48 hours.

Bloomberg/Getty Images

Here are the Meta Q3 earnings highlights:

  • Revenue increased 26% to $51.2 billion year over year.
  • Operating margin was 40% compared to 43% in Q3 2024.
  • Net income decreased by 83% to $2.7 billion.
  • Diluted earnings per share (EPS) dropped to $1.05 from $6.03 in Q3 2024.

The company provided an outlook for Q4/full year 2025:

  • Total revenue for Q4 2025, in the range of $56 billion to $59 billion
  • Full year 2025 total expenses in the range of $116 billion to $118 billion
  • 2025 capital expenditures, including principal payments on finance leases, in the range of $70 billion to $72 billion

The company said the Q3 provision for income taxes includes a one-time, non-cash income tax charge of $15.93 billion, due to the One Big Beautiful Bill Act.

Excluding this one-time tax charge, net income would have increased by $15.93 billion to $18.64 billion, compared to the reported net income of $2.71 billion. 

Meta noted that it expects a significant reduction in its U.S. federal cash tax payments for the remainder of 2025 and future years due to the implementation of the One Big Beautiful Bill Act.

While Meta provided an explanation for the massive drop in net income and EPS, it still panicked investors. The stock took a hit in the after-market and is trading 12% lower near $660, at the time of writing.

Bank of America lowers Meta stock price target

Following the release of the earnings, Bank of America analysts Justin Post and Nitin Bansal updated their opinions on Meta (Meta) stock.

Analysts noted that Meta’s Q3 revenue at $51.2 billion beat Wall Street estimates of $49.6 billion. They also said the midpoint of Q4 revenue guidance given by Meta at $56 billion to $59 billion was above Wall Street at $57.4 billion, and suggests around 23% ad revenue growth at the high end.

Post increased his revenue estimate for 2026 by 1% to $240 billion, and lowered EPS estimate by 10% to $28.86.

Post reiterated a buy rating. His lowered price target to $810 from $900 is based on 27 multiple of his estimate for GAAP EPS for 2027, plus net cash.

“On a total company basis, including Metaverse investments, our valuation is at a slight premium to S&P 500, given Meta’s higher growth rate and AI opportunity,” he said. “Historically, Meta has traded at an average premium of 3pts to S&P 500.”

Analysts noted downside risks for Meta:

  • Decline in user activity from competition
  • Privacy or data issues impacting revenue generation
  • Potential for Wall Street to assign a negative value to Metaverse (Reality Labs)
  • New regulations that impact monetization

Meta’s recent activity

Meta made a deal with Blue Owl Capital to finance its supercomputer Hyperion in a joint venture.

Funds managed by Blue Owl Capital will own an 80% interest in the joint venture, and a portion of the capital raised by Blue Owl will be funded through debt issued to PIMCO and select other bond investors via a private securities offering.

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Both companies will fund their respective pro rata share of the approximately $27 billion in total development costs for the buildings and long-lived power, cooling, and connectivity infrastructure at the campus. Meta will retain a 20% equity stake.

Meta hired and poached a lot of AI developers this year for its superintellience unit. It recently laid off about 600 people from its superintelligence lab. In an internal company memo, Meta Chief AI Officer Alexandr Wang wrote:

“By reducing the size of our team, fewer conversations will be required to make a decision, and each person will be more load-bearing and have more scope and impact.” 

The layoffs target the company’s FAIR AI research, product-related AI, and AI infrastructure units, and will not affect the TBD Lab unit.

Related: Nvidia makes a major push for quantum computing