Meta forecast "notably larger" capital expenses next year, thanks to investments in AI, and recorded a nearly $16 billion one-time charge related to U.S. President Donald Trump's 'Big Beautiful Bill' that pummeled its third-quarter profit.

Shares of the company fell around 6% after the bell. Excluding the charge, Meta's third-quarter net income would have increased to $18.64 billion, compared to the reported net income of $2.71 billion.

While third-quarter revenue beat estimates, the 26% growth was outpaced by a 33% increase in costs, which pressured margins.

After a late start, Meta has doubled down on AI, with a target of achieving superintelligence, a theoretical milestone where machines could outthink humans.

To that end, it has spent hundreds of billions of dollars to build several massive AI data centres for superintelligence and is planning for bigger financial outlays to meet big compute needs.

"There's a range of timelines for when people think that we're going to get superintelligence," CEO Mark Zuckerberg said on a conference call with analysts.

"I think that it's the right strategy to aggressively front-load building capacity, so that way we're prepared for the most optimistic cases."

If superintelligence takes longer than expected, then Meta will use the extra compute to accelerate its core business, and in the worst case, the company would slow down building new infrastructure for some periods, he said.

HIRING SPREE BOOSTS EXPENSE OUTLOOK

Meta has reorganised its AI efforts under the Superintelligence Labs unit in June, and Zuckerberg has personally led an aggressive talent hiring spree.

Employee compensation costs will be the second largest contributor to the increase in costs next year to account for the compensation of employees hired throughout 2025, particularly AI talent, Meta CFO Susan Li said in a statement.

"As we have begun to plan for next year, it has become clear that our compute needs have continued to expand meaningfully ... we expect to invest aggressively to meet these needs both by building our own infrastructure and contracting with third-party cloud providers,"

"We anticipate this will provide further upward pressure on our capital expenditures and expense plans next year."

The company is among the top buyers of Nvidia's sought-after AI chips.

The social media company also boosted the lower end of its capital expenditure outlook to between $70 billion and $72 billion this year, compared with its prior forecast of $66 billion to $72 billion.

MASSIVE USER BASE FUELS AD REVENUE

Meta continues to benefit from its massive user base. The company's powerful AI-optimised ad platform helps marketers automate campaigns, improve the quality of video ads, translate ads and generate persona-based images to target different customer segments.

The company has launched ads on its messaging platform WhatsApp and social network Threads, directly competing with platforms such as Elon Musk's X, while Instagram's Reels continues to jostle with ByteDance's TikTok and YouTube Shorts for ad revenue in the short-video market.

Meta said it expects fourth-quarter revenue between $56 billion and $59 billion, compared with analysts' average estimate of $57.25 billion, according to data compiled by LSEG.

The company struck a $27 billion financing deal last week with Blue Owl Capital, Meta's largest-ever private capital agreement, to fund a massive data centre project in Richland Parish, Louisiana, known as "Hyperion."

Major tech companies, including Alphabet, Amazon.com, Meta, Microsoft and CoreWeave, are on track to spend $400 billion on AI infrastructure this year, Morgan Stanley estimates.

The investments come amid economic uncertainty and have fueled fears of an AI bubble, putting pressure on CEOs to deliver measurable results.