What to know about Meta’s stock drop

Friday 31 October 2025

When Meta Platforms (META) released its latest earnings, the stock dropped 13%. On the surface, the numbers don’t look great – but it’s not that simple. Here’s a breakdown of what really happened, and why investors are feeling uncertain.

 

Unpacking the big tax charge

Meta actually beat revenue estimates, showing strong gains for the quarter, but its net income took a hit. This wasn’t due to poor business performance; it was almost entirely due to a massive, one-time, non-cash tax charge of $15.93 billion.

• The problem: An $18.9 billion provision for income taxes was recorded, a massive jump from last year. This included the one-time charge, related to President Trump’s so-called One Big Beautiful Bill Act.
• The reality: Without that one-time charge, Meta’s adjusted earnings would have been $7.25 per share, which would have easily topped estimates.

This charge shouldn’t affect future earnings, and in fact, Meta expects it will significantly reduce its future cash tax payments.

What’s more, the S&P 500 itself is trading flat – which proves how important diversification is to helping investors weather periods of market volatility.

 

Why investors are concerned about spending

So, if the actual revenue was strong and the earnings hit was a one-off, why did the stock drop? Well, investors are also feeling jittery about Meta’s ambitious AI spending.

Meta is pouring a lot of money into its future, raising its projected spending for 2025 and saying capital expenditures will be “notably larger” in 2026. A big chunk of this goes toward building new AI data centres and investing heavily in its Superintelligence Labs.

Investors aren’t entirely convinced this huge investment will deliver enough return, especially since Meta’s Reality Labs division (which includes the Metaverse and VR) continues to lose billions – losing $4.4 billion last quarter alone.

 

Decide if this dip is an opportunity

Meta still expects strong revenue growth next quarter. The company is dipping its toes into a lot of different AI areas, and some may hit, some may not. But Meta remains a dominant force in its core market.

Consider why you invested in Meta to begin with, and remember that buying stocks is a long-term investment and you should plan to hold for five years or more.