Meta Stock Was Unfairly Punished; Investors Should Focus on Future AI-Driven Growth

Bad:

High Capex: Capex increased 110% YoY in Q3 2025, or 105% in the first three quarters of this year. High Estimated Capex: Meta expects 2026 capital expenditure (Capex) to increase significantly. The company raised the lower end of its Capex outlook for 2025 by $4 billion, now ranging from $70 billion to $72 billion. Lower Operating Income Growth (+18% YoY): Revenue rose 26% YoY, but expenses grew 32% YoY — expenses are rising faster than revenue.

Good:

Meta recorded a one-time, non-cash income tax charge of nearly USD 16 B under President Donald Trump’s One Big Beautiful Bill Act (OBBBA) fiscal policy, which reduced its quarterly net profit to USD 2.71 B. Without this one-time burden, net profit would have reached approximately USD 18.64 billion. Hence, Meta’s stock was unduly impacted by this one-time accounting charge.

But META expects a significant reduction in our U.S. federal cash tax payments going forward due to the implementation of the OBBBA. I reckon investors have yet to fully grasp the potential tax savings from 100% bonus depreciation and the deductibility of domestic R&D expenditures.

Overall, I remain constructive on Meta $Meta Platforms, Inc.(META)$ over the long term, but the “higher capex, lower margin” narrative may continue to weigh on the share price in the short term.

META Cuts Metaverse Budget: Can it Close Its Earnings Gap?

Meta CEO Mark Zuckerberg is reportedly considering cutting the metaverse division’s 2026 budget by up to 30%. According to Mizuho analysts, if the rumored scale of the “budget cut” is accurate, it could boost Meta’s 2026 EPS by around $2, potentially driving a significant rally in the stock. After Meta’s recent earnings report, the stock plunged sharply, leaving behind a large earnings gap. If the stock manages to fill that gap, Meta could return to $750. Would you continue to hold it? Is it still a good idea to add to the position now?

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Comments

Valerie Archibald
11-02
Valerie Archibald
My argument is simple . P/E ratio among AI leaders for META is quite low. If AI bubble to collapse, others would go south more than META. It is a solid company with future. I can wait for a year to see it goes up even if I know by Dec end it would atleast cross 700 mark.
Mortimer Arthur
11-02
Mortimer Arthur
Forward PE of 24...the Steal of the Century!
chenobserver
10-31
chenobserver
It's crucial to highlight the long-term potential here.