"Last year, one of the better performers among the Magnificent 7 was Meta Platforms Inc. ( NASDAQ: META). But its third-quarter earnings report raised investor concerns about the company's massive capital spending on artificial intelligence initiatives. In addition, Meta said it planned to make significant cuts to the budget of its Reality Labs metaverse division in the coming year. The stock is down 18.0% since the quarterly report was released."
"Strong quarterly reports earlier in 2025 (despite a tax charge) had lent credence to the claim that Meta would continue to outshine its competitors over the coming year. The share price hit an all-time high of $796.25 back in August. The stock is still trying to recover from the pullback in November, and it is now up 3.6% year over year, underperforming the broader market."
"Let's start by addressing the elephant in the room. Investors should not rely on Meta Platforms' Reality Labs metaverse business to drive the company's near-term future growth. In Q3 2025, Reality Labs generated $470 million in revenue, up from $370 million in revenue in the prior quarter. However, during that same time frame, Reality Labs recorded a loss from operations of $4.43 billion."
Meta Platforms' third-quarter results raised concerns about massive capital spending on artificial intelligence and announced planned budget cuts for Reality Labs. Reality Labs generated $470 million in Q3 2025 revenue, up from $370 million the prior quarter, while recording an operating loss of $4.43 billion. The stock declined 18.0% after the quarterly report, remains up 3.6% year over year, and underperformed the broader market after peaking at $796.25 in August. Economic uncertainty and the CEO's controversial past metaverse pivot contribute to investor caution. Investors are advised to consider a wide range of price targets and prepare strategies for varied outcomes.
Read at 24/7 Wall St.
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