Meta Q3 Profit Dips 83% from Tax Charge, But Revenue Soars with Strong AI Investment and User Growth

Meta Platforms reported a significant 83% decline in its third-quarter net profit, primarily attributed to a substantial one-time tax charge stemming from President Donald Trump’s recently enacted ‘One Big Beautiful Bill Act.’ Despite this accounting impact, the tech giant demonstrated robust underlying business strength, with revenue soaring and daily active users continuing to expand, fueled by aggressive investments in artificial intelligence (AI) and its burgeoning “superintelligence” initiatives.

For the quarter, Meta generated an impressive $51 billion in revenue, marking a 26% increase year-over-year. However, the reported net profit plummeted to just $2.7 billion. This sharp decline was almost entirely due to a $15.93 billion non-cash income tax charge recognized under the ‘One Big Beautiful Bill Act.’ Without this specific charge, Meta’s net income would have actually risen by 19% to $18.64 billion, showcasing the underlying health of its operations.

While the tax charge significantly impacted Q3, Meta anticipates a considerable reduction in its U.S. federal cash tax payments for the remainder of 2025 and in subsequent years, painting a more favorable long-term tax landscape for the company. The company’s effective tax rate for the quarter was 87%, though it expects this to normalize to 12-15% in Q4, assuming no further tax landscape changes.

Meta’s “All-In” AI Strategy and Vision

Meta is heavily investing in the future, pouring billions into developing AI “superintelligence,” which CEO Mark Zuckerberg hails as a “paradigm shift” in computing. During the earnings call, executives dedicated substantial time to discussing AI’s transformative potential and its role in shaping future customer relationships.

Zuckerberg expressed optimism, stating, “We had a strong quarter for our business and our community. Meta Superintelligence Labs is off to a great start and we continue to lead the industry in AI glasses. If we deliver even a fraction of the opportunity ahead, then the next few years will be the most exciting period in our history.” He further emphasized Meta’s commitment to open-source AI, asserting that “when Meta innovates, everyone benefits,” and highlighted the lab’s exceptional “talent density.”

Strong User Growth and Advertising Performance

Beyond financials, Meta reported healthy operational growth. Its family of apps – Facebook, Instagram, WhatsApp, and Threads – now collectively boast 3.54 billion daily active users, an 8% increase year-over-year. This consistent user engagement underscores the platform’s enduring appeal and global reach.

Advertising remained a primary revenue driver, with ad impressions growing by 14% and the average price per ad increasing by 10% annually. The company’s workforce also expanded by 8% to 78,450 employees as of September 30.

Key Third Quarter Financial Highlights:

• Revenue: $51.24 billion, up 26% year-over-year, surpassing analyst estimates of $49 billion. Most revenue was generated from advertising.
• Reported Net Income: $2.71 billion, an 83% drop from Q3 2024 due to the tax charge. (Excluding the charge, net income was $18.64 billion, up 19% year-over-year.)
• Daily Active Users (DAU): 3.54 billion across its apps (Facebook, Instagram, WhatsApp, Threads), an 8% increase year-over-year.
• Earnings Per Share (EPS): $7.25 (adjusted for the tax charge), surpassing the $6.71 analyst projection.

Reality Labs and Generative AI Traction

Meta’s Reality Labs division, responsible for AI, virtual reality, and augmented reality, reported a $4.43 billion loss for the quarter. This figure is slightly lower than the previous quarter’s $4.53 billion loss, with the company noting the introduction of Quest 3S and Quest headsets hitting the market to prepare for the holiday season as factors.

On the generative AI front, Meta’s video platform, Vibes, is showing remarkable traction. CFO Susan Li highlighted that users have generated over 20 billion images since Vibes launched in September, with media generation increasing tenfold. Furthermore, over a billion people now use Meta AI monthly, with Instagram alone reaching 3 billion monthly active users and Threads attracting 150 million daily active users.

Zuckerberg remained somewhat coy about the specific details of Meta’s AI advancements, but indicated that these innovations would eventually bolster existing platforms and services while unlocking significant new business opportunities, securing Meta’s position at the forefront of AI development.

Outlook for Q4 and Full Year 2025

Looking ahead, Meta anticipates fourth-quarter total revenue to be in the range of $56-59 billion. Full-year 2025 total expenses are projected between $114-118 billion, reflecting a growth rate of 20-24% year-over-year.