"This year, one of the better performers among the Magnificent 7 had been 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 says it plans to make significant cuts to the budget of its Reality Labs metaverse division in the coming year. The stock is down 13.4% since the quarterly report was released."
"Strong quarterly reports earlier this year (despite a tax charge) had lent credence to the claim that Meta would continue to outshine its competitors over the next year. The share price hit an all-time high of $796.25 back in August. Due to the recent pullback, the stock is up 5.0% year over year, underperforming the broad 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 earnings raised concerns about heavy capital spending on artificial intelligence and prompted a 13.4% stock decline since the report. The company plans significant budget cuts for Reality Labs, its metaverse division. Reality Labs revenue rose to $470 million in Q3 2025 from $370 million the prior quarter, while the division posted an operating loss of $4.43 billion. Strong earlier quarterly results and an August all-time high share price of $796.25 contrast with a current year-over-year gain of only 5.0%, underperforming the broader market. Economic uncertainty and CEO Mark Zuckerberg's controversial profile add investor risk considerations, supporting the need for a range of price-target strategies.
Read at 24/7 Wall St.
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