Meta’s third-quarter earnings call revealed a mix of strong performance and significant challenges, leading to a 9% drop in after-hours shares despite beating revenue expectations. Here are the five key takeaways from the call. First, Meta’s massive investment in AI infrastructure is driving soaring costs. CEO Mark Zuckerberg and CFO Susan Li highlighted that Meta now expects to spend between $70 billion and $72 billion on infrastructure this year, with even higher growth projected for 2026. The company is investing heavily in both its own data centers and third-party cloud capacity, with compute and talent identified as the two biggest drivers of future growth. Li noted that employee compensation will be the second-largest expense driver in 2026, reflecting a full year of salaries for AI specialists hired in 2025. Zuckerberg emphasized that this is not a short-term cost but a strategic bet on building "novel capabilities" that will define Meta’s long-term advantage. Second, Reality Labs continues to struggle despite some progress. The unit reported $470 million in revenue and an operating loss of $4.43 billion, a slight improvement from the $4.53 billion loss in the prior quarter. While holiday season inventory stocking boosted short-term sales, Li acknowledged that the lack of a new Quest headset this year is creating headwinds. However, she expressed confidence in the future, citing strong demand for AI glasses and expecting significant year-over-year growth in that segment during Q4, which may help offset the Quest-related slowdown. Third, a $15.9 billion one-time tax charge significantly impacted the results. The charge stems from changes in the U.S. tax code under the recently passed One Big Beautiful Bill Act, which led to a valuation allowance on Meta’s deferred tax assets. While the charge is non-cash, it created a major drag on earnings. Li noted that despite the one-time hit, Meta’s future federal cash tax payments are expected to drop dramatically, with the effective tax rate potentially falling from 87% to 14% without the charge. This shift is seen as favorable for Meta’s long-term financial flexibility, especially as it continues to invest in AI. Fourth, AI is starting to boost user engagement and ad performance. Zuckerberg reported that AI-powered recommendation systems have increased time spent on Facebook by 5%, on Threads by 10%, and video viewing on Instagram by over 30% in the past year. Reels now has an annual run rate exceeding $50 billion. He also highlighted that as AI-generated content grows, these improvements will become even more impactful. Li added that Meta’s generative AI tools for advertisers—such as AI-generated music—are already driving better performance and could help offset losses from Reality Labs. Finally, Meta’s AI glasses are proving to be a major success story. Despite skepticism about consumer adoption, Zuckerberg said the new Ray-Ban Displays sold out in nearly every retail location within 48 hours. Demo appointments are booked through the end of next month, indicating strong early demand. He emphasized that the glasses’ AI features will soon become their primary use case, with revenue coming not just from hardware sales but also from the services layered on top. Partnerships with Ray-Ban and Oakley are progressing well, and Meta sees the product line as a potentially "very profitable investment" in the long run.