Meta’s AI Momentum Powers Growth—But Costs Cloud Q3 Earnings

Meta Platforms reported $51.2B in Q3 2025 revenue, up 26% year-over-year, driven by AI-powered advertising and growth across Instagram and Threads. Despite record engagement, net income fell sharply due to a one-time tax impact and rising infrastructure costs.

carlos.artiles

Nov 5, 2025 - 11:50

Nov 9, 2025 - 18:38

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Meta’s AI Momentum Powers Growth—But Costs Cloud Q3 Earnings

Meta Platforms Inc. reported strong revenue growth for Q3 2025, posting $51.2 billion in revenue, representing a 26% increase year-over-year, led by robust advertising gains and rapid expansion of its Family of Apps. The quarter was affected by a one-time deferred tax asset reduction and a resulting effective tax rate of 87%, which drove net income down to $2.7 billion, an 83% decrease year-over-year. Operating income climbed to $20.5 billion (+18%), while total expenses accelerated by 32%, fueled by higher employee compensation, infrastructure investment, and legal costs.

Key financial and valuation metrics for Q3 2025:

Metric	Q3 2025	Q3 2024	% Change
Revenue	$51.2 billion	$40.6 billion	+26%
Operating Income	$20.5 billion	$17.4 billion	+18%
Operating Margin	40%	43%	-3ppt
Total Expenses	$30.7 billion	$23.2 billion	+32%
Net Income	$2.7 billion	$15.7 billion	-83%
EPS	$1.05	$6.03	-82.6%
Effective Tax Rate	87% (one-time)	12%	+75ppt
Free Cash Flow	$10.6 billion	$15.52	-31.5%
Capital Expenditure	$19.4 billion	$9.20 billion	110%
Cash & Securities	$44.4 billion	$70.9 billion	-37.3%
Debt	$28.82 billion	$28.83 billion	.03%

Key conference call highlights:

Strong ad demand drove ad impressions higher by 14% and average price per ad by 10%.
Instagram surpassed 3 billion monthly active users; Threads reached 150 million daily actives, propelling network effects and engagement.
Artificial intelligence tools powered ad products with a $60 billion annual run rate and improved user engagement metrics, especially on Facebook and Threads.
Expense growth came from legal charges, infrastructure build-out, and aggressive hiring for AI talent.
Management confirmed more expense growth ahead in 2026, mainly to fund AI and compute infrastructure.

Opportunities:

Sustained growth in user engagement, notably on Instagram and Threads.
Rapid AI innovation with new launches (Meta AI glasses, Vibes) seeing positive early adoption.
AI-driven ad tools fuelling scalable future monetization.

Risks:

Operating costs and capital expenditures rising fast, which may pressure future margins and profitability.
Vulnerability to regulatory impacts, shown by the one-time tax charge that distorted quarterly net results.
Reality Labs facing near-term weakness as major headset launches slow.

Recent news summary:

Meta lost $200 billion in market capitalization after earnings, driven by lower net income and caution on future expense levels.
Closed a multi-tranche senior note offering, raising $4 billion to fund additional infrastructure and product investments.
Analyst outlook remains mixed; strong growth prospects for AI and engagement, but valuation and cost trajectory are headwinds for near-term sentiment.

Key metrics vs. prior quarters:

Metric	Q3 2024	Q4 2024	Q1 2025	Q2 2025	Q3 2025	% Change YoY
Revenue	$40.6B	$42.9B	$44.2B	$48.9B	$51.2B	+26%
Ad Revenue	$39.8B	$42.0B	$43.9B	$48.6B	$50.1B	+26%
Operating Income	$17.4B	$18.2B	$17.9B	$19.8B	$20.5B	+18%
Total Expenses	$23.2B	$25.0B	$26.4B	$28.7B	$30.7B	+32%
Net Income	$15.7B	$16.4B	$14.6B	$13.7B	$2.7B	-83%