Meta Platforms (NASDAQ:META) stock dropped 11% after its Q3 2025 earnings, marking its steepest decline since 2022. Despite delivering strong financial results that beat Wall Street expectations, investors were alarmed by the company’s aggressive capital expenditure outlook tied to artificial intelligence (AI) expansion.

META’s Strong Quarter Overshadowed by AI Spending

Meta reported adjusted earnings of $7.25 per share on revenue of $51.24 billion, both surpassing consensus estimates. Revenue rose 26% year-over-year (YoY)—the fastest growth rate in 18 months. However, a one-time $15.93 billion tax charge linked to President Trump’s recent tax reforms weighed on net income, even though it will reduce future cash payments.

The real shock came from Meta’s revised spending plans. Management now expects capital expenditures to hit between $70 billion and $72 billion in 2025, higher than the previous midpoint of $69 billion. CEO Mark Zuckerberg justified the move, explaining that Meta must “build capacity ahead of breakthroughs in superintelligence.”

This bold strategy mirrors trends across the tech industry. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) recently raised its capex outlook to $91–93 billion, while Microsoft (NASDAQ:MSFT) also plans accelerated infrastructure investments. Meta’s recent $14.3 billion investment in Scale AI and new cloud partnerships highlight its determination to lead in AI innovation.

Reality Labs Still a Drag

Not all segments are performing as strongly. Reality Labs, Meta’s virtual and augmented reality arm, continues to drain resources. The division posted a $4.4 billion operating loss on just $470 million in revenue for the quarter, pushing cumulative losses beyond $70 billion since 2020.

Still, early signs of traction exist. The new $799 Ray-Ban AI glasses have sold out, showing rising consumer interest in AI-integrated hardware. Zuckerberg emphasized that Reality Labs plays a long-term strategic role in building the metaverse and advancing mixed-reality experiences.

AI Powers Meta’s Core Growth

Despite investor concerns, Meta’s AI-driven improvements are fueling engagement and revenue growth across its core social platforms. Facebook’s user time increased 5% YoY, Threads usage jumped 10%, and video consumption on Instagram climbed over 30%.

Reels now generates an annualized $50 billion in revenue—proof that AI-powered recommendations and ad optimization are paying off. Advertising revenue surged 26% to $50.1 billion, with Meta’s Advantage+ automation tools processing $60 billion in ad sales annually.

Under its Lattice architecture, Meta is consolidating hundreds of smaller ad models into powerful unified systems. The company also revealed that Meta AI tools have surpassed one billion active users, generating over 20 billion images to date.

Its latest feature, Vibes, which creates short AI-generated videos, has driven a tenfold increase in media creation since its September debut.

Expanding Business AI and Messaging

Meta is also scaling AI for business communication. Click-to-WhatsApp ads grew revenue by 60% YoY, and new AI tools that help companies automate customer service have launched in Mexico and the Philippines. These initiatives aim to convert WhatsApp into a global business commerce platform.

Management expects even greater spending in 2026, as infrastructure and cloud investments accelerate. Although this may temporarily pressure margins, Meta believes the payoff in AI productivity and advertising efficiency will be substantial.

Should You Buy META Stock Now?

META stock has soared over 600% in three years, underscoring investor confidence in its AI transformation. Analysts project revenue to grow from $164.5 billion in 2024 to $340 billion by 2029, an annualized growth rate of 15.6%.

Earnings are forecast to climb from $23.86 per share to $39.12 per share by 2029—about 10% annual growth. At 22.8x forward earnings, META stock trades near its five-year average valuation.

If re-rated at 20x earnings, the stock could rise another 20% by 2028. According to FactSet, 46 out of 57 analysts rate META stock a “Strong Buy,” with an average price target of $872, implying nearly 25% upside from current levels near $652.

Bottom Line

While Meta’s soaring AI spending unnerved some investors, its growth trajectory in advertising, automation, and user engagement remains impressive. The company’s aggressive infrastructure buildout could secure long-term dominance in generative AI.

For investors with a multi-year outlook, this latest sell-off may represent a buy-the-dip opportunity in META stock—one backed by robust fundamentals and unmatched scale in the AI ecosystem.