What Happened?
Shares of social network operator Meta Platforms (NASDAQ: META) fell 12.2% in the morning session after its third-quarter 2025 earnings report revealed a significant miss on profits due to a one-time tax charge, alongside declining margins and merely in-line revenue guidance, which overshadowed its strong sales growth.
While the company posted a 26.2% year-over-year increase in revenue to $51.24 billion, beating analyst expectations, its reported earnings per share (EPS) of $1.05 missed estimates by 84.3%. The sharp drop in profit was due to a one-time, non-cash income tax charge of $15.93 billion. Excluding this charge, diluted EPS would have been $7.25, ahead of consensus. However, investors were also focused on other areas. The company's revenue guidance for the upcoming quarter was only in line with Wall Street expectations, suggesting growth might not accelerate further. Furthermore, profitability metrics showed some weakness, with both operating and EBITDA margins declining compared to the same quarter last year, indicating rising costs. The combination of the jarring headline profit miss and lukewarm forward guidance left investors wanting more, leading to the stock's decline.
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What Is The Market Telling Us
Meta’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Meta and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 20 days ago when the stock dropped 2.6% on the news that President Trump threatened to impose "massive" new tariffs on Chinese imports, reigniting trade war fears. The unexpected announcement shattered a monthslong calm on Wall Street, sending major indices tumbling. The S&P 500 dropped around 1.3%, while the tech-rich Nasdaq Composite fell 1.7%. Investors reacted by selling off stocks, particularly in the technology and retail sectors, amid concerns that escalating trade tensions could disrupt global supply chains and increase costs for companies. The sell-off marked a significant reversal from the morning's slight gains, highlighting the market's sensitivity to geopolitical trade developments.
Meta is up 12.7% since the beginning of the year, but at $675.41 per share, it is still trading 14.5% below its 52-week high of $790 from August 2025. Investors who bought $1,000 worth of Meta’s shares 5 years ago would now be looking at an investment worth $2,567.
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