Meta Platforms delivered a mixed bag in its third quarter of 2025. The company surpassed revenue expectations, registering $51.24 billion against the $49.6 billion consensus, yet concerns over future AI capital spending and a hefty non-cash income tax charge quickly overshadowed this achievement.
In after-hours trading, Meta’s stock plunged approximately 8 percent as investors digested the results and CEO Mark Zuckerberg’s warnings about a massive ramp-up in AI infrastructure costs.
Microsoft also beat estimates, fueling expectations of a strong cycle for big tech. However, both companies faced sharply divergent market reactions compared to Alphabet.
While Alphabet soared 6 percent on robust cloud growth, Meta and Microsoft found themselves punished despite stellar headline numbers. The split highlights investor uncertainty amid surging tech-sector spending.
How Did Meta’s Earnings Surprise Unfold?
Meta outperformed analysts' revenue estimates, but its earnings per share took a significant hit. The decline resulted from a one-time, non-cash tax charge of $15.93 billion linked to President Trump's “One Big Beautiful Bill Act.”
This charge sent EPS tumbling to $1.05, a stark miss from the expected $6.72 per share. Without this charge, Meta would have posted strong growth with $7.25 per share, pleasing most shareholders under normal conditions.
Investors quickly turned their attention to Meta’s revised capital spending forecasts. CFO Susan Li announced the company is raising its projected 2025 spend to $70-72 billion, with 2026 costs likely reaching $100 billion as Meta races to build new AI infrastructure.
The scale of this spending, combined with uncertainty about returns, intensified market anxiety just as Meta’s business growth appeared robust.
Did you know?
Meta’s projected $100 billion AI infrastructure spend for 2026 could exceed the GDP of some small countries.
Why Are AI Investments Triggering Market Volatility?
Big tech’s pursuit of AI leadership demands massive capital outlays. Investors now find themselves in a paradox: demanding faster innovation, yet wary of soaring expenses.
Meta’s aggressive infrastructure buildout signals a belief in AI’s transformative value, but it is unclear how quickly these investments will translate into earnings per share. The result is heightened volatility and sharper market scrutiny each earnings season.
The Magnificent Seven, big tech’s leading companies, collectively maintain a net margin far above the S&P 500 average, roughly 27 percent, compared with 13 percent for the index.
Even so, the companies now represent more than 37 percent of the S&P 500’s weighting, amplifying the effects of any earnings miss or spending surprise.
What Was Behind Microsoft’s Unexpected Stock Slide?
Microsoft similarly beat revenue and cloud growth forecasts, reporting $77.7 billion in quarterly sales and 40 percent year-over-year growth in Azure cloud revenue. Yet, the mood shifted after CFO Amy Hood acknowledged that AI-driven capital expenditure growth will accelerate in fiscal 2026, not slow down as once suggested.
Investors responded by driving Microsoft shares down about 4 percent despite upbeat numbers. Microsoft’s AI infrastructure investments surged to $34.9 billion in Q3, marking a 74 percent increase over last year.
This outsized spend reflects the arms race among tech leaders, as well as shareholders' caution about future profitability and returns.
Many analysts described Microsoft’s business performance as “blockbuster,” yet cautioned that cost discipline will remain key to maintaining investor confidence.
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How Did Alphabet Outperform Its Peers This Quarter?
Unlike its rivals, Alphabet’s results eased investor nerves. The company’s total revenue reached $102.35 billion, beating analyst expectations, while Google Cloud delivered standout growth with $15.16 billion in sales and 34 percent year-over-year expansion.
CEO Sundar Pichai emphasized that AI already delivers “billions of dollars” to its cloud segment and disclosed more than $10 billion in new cloud deals sealed during the year.
Alphabet’s relatively moderate capital spending and proven return on AI investments provided a template for managing investor expectations.
The stock surged 6 percent, separating Alphabet from Meta and Microsoft. This contrast reinforced the importance of pairing innovation with disciplined financial execution.
What Could Q4 Hold for Big Tech Investors?
The contrasting aftermath of these Q3 results sets up an uncertain Q4. Investors and analysts will closely monitor how Meta and Microsoft deploy capital, striving to see measurable improvements in efficiency and profitability as AI infrastructure scales up.
Alphabet’s success story this quarter will put pressure on competitors to deliver not just growth, but visible returns on heavy spending in the coming quarters.
Amid ongoing volatility, big tech faces an inflection point: balancing visionary AI investment with the discipline needed to maintain strong margins.
If Meta and Microsoft can translate their AI bets into profits next quarter, investor confidence may return. Until then, heightened scrutiny and selective risk-on behavior will likely rule the sector.
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