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Meta recorded a nearly $16 billion one-time charge in the third quarter related to U.S. President Donald Trump’s Big Beautiful Bill, and said its capital expenditure next year would be “notably larger” than in 2025. Shares of the company fell around 6% after the bell. Excluding the charge, Meta said its third-quarter net income would have increased by $15.93 billion to $18.64 billion, compared to the reported net income of $2.71 billion. The social media company now expects capital expenditure to be between $70 billion and $72 billion, compared with its prior forecast of $66 billion to $72 billion. Meta continues to benefit from its massive user base. The company’s powerful AI-optimized 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 continue to jostle with ByteDance’s TikTok and YouTube Shorts for ad revenue in the short-video market. Meta has been doubling down on AI, with a target of achieving superintelligence, a theoretical milestone where machines could outthink humans. To that end, Meta reorganized its AI efforts under the Superintelligence Labs unit in June, following senior staff departures and a poor reception for its Llama 4 model. CEO Mark Zuckerberg has personally led an aggressive talent hiring spree and has said that the company would spend hundreds of billions of dollars to build several massive AI data centers for superintelligence. The company is among the top buyers of Nvidia’s sought-after AI chips. 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 center project in Richland Parish, Louisiana, known as “Hyperion.” In a surprise move, Meta said last week it would cut around 600 jobs out of the several thousand employees within its AI unit to streamline decision-making and increase the responsibility, scope and impact of each role. The company’s aggressive AI investments are creating significant cost pressures, even as it anticipates long-term benefits and revenue growth. 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. These investments that come amid economic uncertainty have fueled fears of an AI bubble, putting pressure on CEOs to deliver measurable results, as the move could trigger losses, job cuts and boardroom shake-ups. Jaspreet Singh, Reuters
Category:
E-Commerce
Google-parent Alphabet beat Wall Street estimates for third-quarter revenue on Wednesday, as both its core advertising business and cloud computing unit showed steady growth. Shares of the company rose 6% in extended trading. The company reported total revenue of $102.35 billion for the quarter, compared with analysts’ average estimate of $99.89 billion, according to data compiled by LSEG. The cloud services and AI giant raised its capital expenditure forecast for the year to between $91 billion and $93 billion, compared with the estimates of $80.67 billion. Google Cloud remained one of Alphabet’s fastest-growing segments, benefiting from surging enterprise demand for AI-powered infrastructure and data analytics services. The unit posted revenue of $15.16 billion, topping estimates of $14.72 billion. The performance was likely boosted by burgeoning enterprise demand for its AI infrastructure. The unit continues to close the gap with larger rivals Microsoft Azure and Amazon Web Services, aided by strong take-up of Vertex AI and custom Tensor Processing Units. Competition in the broader AI and cloud market is intensifying, with rivals aggressively cutting prices and introducing new generative-AI capabilities. Alphabet’s advertising unit, which brings in the vast majority of the company’s revenue, has been competing in a crowded field of rivals vying for more ad dollars as lower interest rates are expected to lift the economy. However, analysts have pointed to cautious spending from advertisers in some sectors grappling with economic uncertainty due to pressures from tariff costs and a rapidly evolving global trading landscape. Still, Wall Street expects the company to benefit from advertisers moving away from experimental ad platforms like Snapchat and others. The results come just days after Microsoft and SoftBank Group-backed OpenAI unveiled “Atlas,” an AI-powered browser aimed at directly competing with Google’s core search engine and browser stack. The launch represents one of the most significant challenges to Google’s search dominance in years and will be a key focus for investors listening for management’s response to the rising competitive threat to its most lucrative business. Akash Sriram in Bengaluru, Reuters
Category:
E-Commerce
The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring even as inflation stays elevated. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August, the Fed said in a statement issued Wednesday. More recent indicators are consistent with these developments.” The government hasn’t issued unemployment data after August because of the shutdown. The Fed is watching private-sector figures instead. Wednesday’s decision brings the Fed’s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades. Lower rates could, over time, reduce borrowing costs for mortgages, auto loans, and credit cards, as well as for business loans. The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Feds 2% target. Compounding its challenges, the central bank is navigating without the economic signposts it typically relies on from the government, including monthly reports on jobs, inflation and consumer spending, which have been suspended because of the government shutdown. The Fed has signaled it may reduce its key rate again in December but the data drought raises the uncertainty around its next moves. The Fed typically raises its short term rate to combat inflation, while it cuts rates to encourage borrowing and spending and shore up hiring. Right now its two goals are in conflict, so it is reducing borrowing costs to support the job market, while still keeping rates high enough to avoid stimulating the economy so much that it worsens inflation. Speaking to reporters after the Fed announced its rate decision, Fed Chair Jerome Powell said there were strongly differing views about how to proceed in December at the policy meeting and a further reduction in the benchmark rate is not a foregone conclusion. On Wednesday, the Fed also said it would stop reducing the size of its massive securities holdings, which it accumulated during the pandemic and after the 2008-2009 Great Recession. The change, to take effect Dec. 1, could over time slightly reduce longer-term interest rates on things like mortgages but won’t have much impact on consumer borrowing costs. The Fed purchased nearly $5 trillion of Treasury securities and mortgage-backed bonds from 2020 to 2022 to stabilize financial markets during the pandemic and keep longer-term interest rates low. The bond-buying lifted its securities holdings to $9 trillion. In the past three years, however, the Fed has reduced its holdings to about $6.6 trillion. To shrink its holdings, the Fed lets securities mature without replacing them, reducing bank reserves. In recent months, however, the reductions appeared to disrupt money markets, threatening to push up shorter-term interest rates. Two of the 12 officials who vote on the Feds rate decisions dissented, but in different directions. Fed governor Stephen Miran dissented for the second straight meeting in favor of a half-point cut. Miran was appointed by President Donald Trump just before the central banks last meeting in September. Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, voted against the move because he preferred no change to the Feds rate. Schmid has previously expressed concern that inflation remains too high. Trump has repeatedly attacked Powell for not reducing borrowing costs more quickly. In South Korea early Wednesday he repeated his criticisms of the Fed chair. Hes out of there in another couple of months, Trump said. Powells term ends in May. On Monday, Treasury Secretary Scott Bessent confirmed the administration is considering five people to replace Powell, and will decide by the end of this year. Powell was asked about the impact of the government shutdown, which began on Oct. 1 and has interrupted the distribution of economic data. Powell said the Fed does have access to some data that give it a picture of whats going on. He added that, If there were a significant or material change in the economy, one way or another, I think wed pick that up through this. But the Fed chair did acknowledge that the limited data could cause officials to proceed more cautiously heading into its next meeting in mid-December. “Theres a possibility that it would make sense to be more cautious about moving (on rates). Im not committing to that, Im just saying its certainly a possibility that you would say we really cant see, so lets slow down. September’s jobs report, scheduled to be released three weeks ago, is still postponed. This month’s hiring figures, to be released Nov. 7, will likely be delayed and may be less comprehensive when they are finally released. And the White House said last week that October’s inflation report may never be issued at all. Before the government shutdown cut off the flow of data, monthly hiring gains had weakened to an average of just 29,000 a month for the previous three months, according to the Labor Department’s data. The unemployment rate ticked up to a still-low 4.3% in August from 4.2% in July. More recently, several large corporations have announced sweeping layoffs, including UPS, Amazon, and Target, which threatens to boost the unemployment rate if it continues. Powell said the Fed is watching the layoff announcements very carefully. Meanwhile, last weeks inflation report released more than a week late because of the shutdown showed that inflation remains elevated but isnt accelerating and may not need higher interest rates to tame it. The government’s first report on the economy’s growth in the July-September quarter was scheduled to be published on Thursday, but will be delayed, as will Friday’s report on consumer spending that also includes the Fed’s preferred inflation measure. Christopher Rugaber, AP economics writer
Category:
E-Commerce
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