Meta Platforms shows more ads at higher prices

“We expect a significant reduction in our US tax payments for the remainder of 2025 and future years, due to the passage of the One Big Beautiful Law,” Meta Platforms is pleased to inform its shareholders. In the third quarter of the year, the data group increased its revenue by 26 percent to 51.2 billion US dollars, with operating profit growing by 18 percent to 20.4 billion dollars and pre-tax profit by 22 percent to 21.7 billion dollars.

Operating cash flow climbed by over twelve percent to 30 billion dollars compared to Meta Platforms' third quarter of 2024. Nevertheless, net profit has fallen, and significantly so: by a full 83 percent to 2.7 billion dollars, which, however, has no impact on cash reserves at zero dollars. Meta's share price fell by more than seven percent in after-hours trading following the announcement of the quarterly figures.

The reason for the lower net profit is the aforementioned tax cut. This is because it reduces the value of future tax benefits. For example, certain divisions of Meta have written off losses that are offset against future profits, which then saves taxes. Meta has also incurred expenses that have already been incurred commercially but will only become relevant for tax purposes at a later date. If the tax rate is lowered, this reduces the value of such loss carryforwards and expenses. At Meta, this amounts to 16 billion dollars; otherwise, net profit would have increased by 19 percent instead of falling by 83 percent.

Example

A relevant amount of 100 dollars would result in tax savings of 15 dollars at a tax rate of 15 percent. If the tax rate now drops to ten percent, it's only ten dollars, meaning the company has to write off the difference of five dollars. Thus, a tax cut burdens the net profit of all companies that have future tax benefits on their books without them spending a dollar (except for the extra work of those accountants who have to calculate all this).

More advertising, and at higher prices

The increase in revenue is easily explained: Meta showed 14 percent more ads and was simultaneously able to increase the average advertising rate by ten percent. Other revenues play hardly any role. Meta also owes one percentage point of revenue growth to the dollar exchange rate, which has fallen compared to many other currencies that Meta earns. The company benefits from increased interest income and realized securities gains on pre-tax profit.

The number of people using Facebook, Instagram, WhatsApp, and/or Threads daily was, according to company reports, in September 2025 at 3.54 billion dollars. That is eight percent more than in the same month of 2024. The additional users and Meta's efforts in artificial intelligence are causing costs to rise faster than revenue: expenses in the third quarter increased by 32 percent to 30.7 billion dollars, and capital expenditures even by 128 percent to 18.8 billion dollars, plus more than half a billion for leasing (-42 percent).

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