As of the close on November 11, 2025, the share price of tech giant Meta Platforms (META) had fallen to around $619, down approximately 16% since before its earnings release and retreating from its year-to-date high of $790. Despite delivering a third-quarter report that surpassed revenue expectations and beat adjusted earnings per share estimates, the stock unexpectedly encountered a steep decline. Behind this dramatic performance of “winning earnings, losing stock price” lies a deep divergence in market sentiment regarding Meta’s strategic direction.
Meta’s Q3 results appear commendable: revenue grew 26% year-over-year to $51.2 billion, significantly exceeding market expectations of $49.4 billion. Adjusted earnings per share of $7.25 also topped analyst estimates of $6.69. However, a one-time tax expense of $15.9 billion related to the “One Big Beautiful Bill Act” led to a staggering 83% plunge in net profit to $2.7 billion, a figure that undoubtedly shocked the market.
The real cause for concern is the company’s near-feverish investment in AI. Meta raised the lower end of its 2025 capital expenditure guidance from $66 billion to at least $70 billion and forecast that 2026 capital expenditures would be “noticeably larger” than in 2025. Making investors even more uneasy, the company announced plans to invest $600 billion in the United States by 2028 for AI technology, infrastructure, and talent development. Simultaneously, the metaverse division, Reality Labs, continued to record an operating loss of $4.4 billion, flat compared to the same period last year.
Market Concerns: Is History Repeating Itself?
The current pessimistic sentiment towards Meta stems primarily from two levels:
First, the uncertainty surrounding the return on AI investments reminds investors of the company’s excessive spending on the metaverse in 2021-2022. Wall Street analysts point out, “When a company is simultaneously burdened with ongoing metaverse losses and massive AI investments, it’s natural for investors to worry about history repeating itself.” Although AI technology has already demonstrated value in optimizing ad delivery and enhancing user experience, whether it can generate incremental returns commensurate with the investment remains unknown.
Secondly, valuation pressure cannot be ignored. Even after a significant pullback, Meta’s forward price-to-earnings (P/E) ratio remains around 24x, above its five-year average and slightly higher than the S&P 500’s average P/E of 23x. Against a backdrop of uncertain economic prospects and potential downside risks to the advertising market, this valuation level offers investors limited margin of safety.
However, amidst the prevailing pessimism, some positive factors are worth noting: Meta’s core advertising business remains healthy, with both ad impressions and average price per ad rising in the third quarter, proving that its user engagement and monetization capabilities remain unchallenged. The average analyst price target still stands as high as $827.60, suggesting approximately 35% upside from the current stock price.
From a financial perspective, Meta possesses a robust balance sheet and ample free cash flow, providing a solid foundation for its strategic investments Supporters argue that, much like how the company eventually adjusted and returned from its over-enthusiasm for the metaverse, the current aggressive AI spending, while intense, shows management’s flexibility to adapt based on actual conditions.
Investment Advice: Patience for a Better Entry Point
Overall, Meta is currently at a critical stage of strategic investment. For investors considering establishing a position, it’s important to recognize that, in the short term, continuously rising capital expenditures will continue to suppress profit margins, and the impact of the macroeconomic environment on advertising revenue remains a potential risk. The company needs to more clearly demonstrate the commercialization path of its AI investments to rebuild investor confidence.
Considering that the valuation isn’t yet clearly attractive and market sentiment may continue to ferment, investors might consider being patient and waiting for a more optimal entry point. If the stock price further corrects to a more reasonable valuation range, or if the company provides a clearer timeline for AI profitability, it could present a better opportunity to build a position.
In the wave of tech giants competing to burn cash in AI, Meta’s investments are strategically necessary. However, investors need to weigh the price they are paying for this potential. At this moment full of uncertainty, maintaining a watchful stance may be a wiser choice than blindly buying the dip.
