"Last year, one of the better performers among the Magnificent 7 was Meta Platforms Inc. ( NASDAQ: META). But its third-quarter earnings report raised investor concerns about the company's massive capital spending on artificial intelligence initiatives. In addition, Meta said it planned to make significant cuts to the budget of its Reality Labs metaverse division in the coming year. The stock is down 9.3% since the quarterly report was released."
"Strong quarterly reports earlier in 2025 (despite a tax charge) had lent credence to the claim that Meta would continue to outshine its competitors over the coming year. The share price hit an all-time high of $796.25 back in August. The stock is trying to recover from the pullback in November, and it is now up 12.6% year over year, narrowly underperforming the broader market."
"Let's start by addressing the elephant in the room. Investors should not rely on Meta Platforms' Reality Labs metaverse business to drive the company's near-term future growth. In Q3 2025, Reality Labs generated $470 million in revenue, up from $370 million in revenue in the prior quarter. However, during that same time frame, Reality Labs recorded a loss from operations of $4.43 billion."
Meta Platforms showed strong earlier 2025 quarterly results but investor worries rose after a third-quarter report highlighting massive capital spending on artificial intelligence. Reality Labs produced modest sequential revenue growth but posted an enormous operating loss, prompting planned budget cuts. The stock fell 9.3% after the quarterly report, though it remains up 12.6% year over year and reached an all-time high of $796.25 in August. Economic uncertainty and the CEO's controversial reputation add complexity. The company is shifting focus toward AI initiatives, and investors should prepare strategies for a wide range of price outcomes.
Read at 24/7 Wall St.
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