Meta takes $16B hit to earnings from Trump’s Big Beautiful Bill, warns of higher AI costs

Meta forecast “notably larger” capital expenses next year thanks to investments in AI, and recorded a nearly $16 billion one-time charge related to President Trump’s ‘Big Beautiful Bill’ that pummeled its third-quarter profit.

Shares of the company fell more than 6% after the bell.

Excluding the charge, Meta said its third-quarter net income would have increased by $15.93 billion to $18.64 billion, compared to the reported net income of $2.71 billion.

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While third-quarter revenue beat estimates, the 26% growth was outpaced by a 33% increase in costs, which pressured margins.

After a late start, Meta has doubled down on AI, with a target of achieving superintelligence, a theoretical milestone where machines could outthink humans. To that end, it has spent hundreds of billions of dollars to build several massive AI data centers for superintelligence and is planning for bigger financial outlays to meet big compute needs.

“There’s a range of timelines for when people think that we’re going to get superintelligence,” CEO Mark Zuckerberg said on a conference call with analysts. “I think that it’s the right strategy to aggressively front load building capacity, so that way we’re prepared for the most optimistic cases.”

If superintelligence takes longer than expected, then Meta will use the extra compute to accelerate its core business, and in the worst case, the company would slow building new infrastructure for some periods, he said.

The social media company now expects capital expenditure between $70 billion and $72 billion this year, compared with its prior forecast of $66 billion to $72 billion.

“We anticipate this will provide further upward pressure on our capital expenditures and expense plans next year.”

Employee compensation costs will be the second largest contributor to the increase in costs, Li said, to account for the compensation of employees hired throughout 2025, particularly AI talent.

Massive user base fuels ad revenue

Meta continues to benefit from its massive user base. The company’s powerful AI-optimized ad platform helps marketers automate campaigns, improve the quality of video ads, translate ads and generate persona-based images to target different customer segments.

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The company has launched ads on its messaging platform WhatsApp and social network Threads, directly competing with platforms such as Elon Musk’s X, while Instagram’s Reels continue to jostle with ByteDance’s TikTok and YouTube Shorts for ad revenue in the short-video market.

Meta has been doubling down on AI, with a target of achieving superintelligence, a theoretical milestone where machines could outthink humans.

To that end, Meta reorganized its AI efforts under the Superintelligence Labs unit in June, following senior staff departures and a poor reception for its Llama 4 model.

The company struck a $27 billion financing deal last week with Blue Owl Capital, Meta’s largest-ever private capital agreement, to fund a massive data center project in Richland Parish, La., known as “Hyperion.”

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In a surprise move, Meta said last week it would cut around 600 jobs out of the several thousand employees within its AI unit to streamline decision-making and increase the responsibility, scope and impact of each role.

The company’s aggressive AI investments are creating significant cost pressures, even as it anticipates long-term benefits and revenue growth.

Major tech companies including Alphabet, Amazon, Meta, Microsoft and CoreWeave are on track to spend $400 billion on AI infrastructure this year, Morgan Stanley estimates.

These investments that come amid economic uncertainty have fueled fears of an AI bubble, putting pressure on CEOs to deliver measurable results, as the push could trigger losses, job cuts and boardroom shake-ups.