Quick Overview:

  • Meta CFO Susan Li said on Wednesday that the company's employee compensation costs accelerated in the third quarter, driven by "technical" hiring, especially for AI talent.
  • The tech giant had more than 78,400 employees at the end of the third quarter, up 8% year-over-year, Li said on the earnings call, attributing this to factors such as hiring in "priority revenue-generating areas."
  • Looking ahead, she said the company expects employee compensation to be its second-largest expense item next year.

In-Depth Analysis:

This news comes amid earlier reports that Meta launched an AI hiring spree earlier this year.

According to The Wall Street Journal, in August, the company froze hiring in its AI division after spending months "wooing more than 50 AI researchers and engineers." The report said CEO Mark Zuckerberg sent "email pitches and WhatsApp messages" to employees at OpenAI, Google DeepMind, and other labs, which "quickly turned into offers, some with total compensation as high as $100 million."

Meta's employee compensation costs came to light in the company's third fiscal quarter earnings report on Wednesday, covering the period ending September 30.

The parent company of Facebook and Instagram reported total revenue of $51.2 billion for the quarter, up 26% year-over-year.

Net profit fell approximately 83% year-over-year to $2.71 billion, which the company said was primarily due to a one-time corporate tax expense of $15.93 billion resulting from the implementation of the "One Big Beautiful Bill Act."

"We expect our U.S. federal cash tax payments to decrease significantly for the remainder of 2025 and in future years as a result of the One Big Beautiful Bill Act," Meta said in a press release. "However, the enactment of the Act also resulted in us recording a valuation allowance against our U.S. federal deferred tax assets, reflecting the impact of the U.S. corporate alternative minimum tax."

Meta reported that excluding the one-time tax expense, net profit would have been $18.6 billion.

Li said capital expenditures (including finance lease principal payments) were $19.4 billion, driven primarily by investments in servers, data centers, and network infrastructure. Total expenses were $30.7 billion, up 32% year-over-year.

Li said total expense growth in 2026 will be "significantly faster" than this year, with growth driven mainly by infrastructure costs, including incremental cloud spending and depreciation.

"Employee compensation will be the second-largest contributor to growth, as we recognize compensation for employees hired throughout 2025, especially AI talent, and add technical talent in priority areas," she added.

Following the announcement, Meta's stock fell more than 10% on Thursday.

"We believe the market's reaction to Meta's earnings was amplified by Alphabet and Microsoft reporting on the same day, as both hyperscalers saw significant revenue growth in their cloud businesses driven by AI," Morningstar analyst Malik Ahmed Khan said in a client note.

"On the other hand, Meta is essentially building infrastructure at a similar scale but cannot rent out capacity for significant profit. Therefore, investors see Meta's AI investments as riskier than peers, because if AI demand no longer continues to boom, Meta cannot rent out capacity to AI and non-AI workloads."