Meta unveils expensive AI bill

Hey Superheroes,

It was a bumpy week for markets, with inflation worries creeping back into analysts’ radars.

In Australia, annual inflation surged to a surprising 3.2% in the September quarter, up from 2.1% in June – a much hotter read than expected. Electricity prices jumped 23.6%, and economists say this has all but killed hopes of a ‘Race Day Rate  Cut’ on Melbourne Cup Day (4 Nov). Core inflation also rose to 3%, pushing it outside the RBA’s target band.

Meanwhile, Presidents Trump and Xi struck a temporary trade truce, suspending the rare earth ban  and reducing some reciprocal trade tariffs. But analysts say the U.S. made more concessions than gains. With China building out its own export control regime and retaliating strategically, markets are treating the calm as temporary rather than permanent.

Let’s dive into the biggest stories of the week.

Meta’s Reality Check

Meta’s AI ambitions are growing… but so are the costs.

Meta (NASDAQ: META) beat revenue expectations in Q3 but its share price fell 11% as investors digested ballooning costs and a surprise tax hit.

💥 The numbers looked good… at first

Meta reported US$51.24 billion in revenue, up 26% YoY – its strongest growth since early FY24. Its ad business remains the engine with total ad impressions across Facebook, Instagram and Threads rising 14% and average ad prices up 10%.

But profits told a different story. 

Earnings per share fell 83%, down to US$1.05 from US$6.03 a year ago – a staggering headline drop.

💸 Trump’s “Big Beautiful Bill” hurt Meta

The earnings plunge wasn’t driven by operations, but by an unexpected US$15.93 billion non-cash tax expense tied to President Trump’s newly implemented “One Big Beautiful Bill” tax reform. Yup, looks like we’re starting to see the impact of Trump’s regulations on companies.

Meta flagged that excluding the one-off hit, EPS would have risen to US$7.25 with net income up 19%. 

But despite today’s pain, Meta expects the bill to significantly reduce its cash tax payments over coming years.

⚙️ AI costs are starting to bite

Aside from regulatory pains, investors also focused on Meta’s swelling AI infrastructure spend. 

The company raised its full-year capex forecast to US$70–72 billion (up from US$66–72 billion) and warned 2026 spending would be even higher – driven by cloud infrastructure, depreciation and talent costs.

These rising costs are tied to Meta’s AI and hardware bets including its “Reels” video product (now generating over US$50 billion in ad revenue) and its push into smart glasses and AI assistants.

📉 Why investors might be nervous

As mentioned, the market reacted to the news with a big overnight slump in Meta’s stock price.

Meta’s long-term AI strategy is ambitious but with costs rising faster than expected, markets are now demanding clear monetisation. Analysts also warn the company is walking a tightrope between future potential and current profitability.

So while Meta may benefit from lower tax outflows going forward, its capital discipline will remain under the microscope as markets adjust to higher-for-longer rates and tighter risk tolerance.

Amazon surges as cloud comeback begins

While Meta saw red, another one of the Mag 7 saw quite the opposite reaction this week.

Earlier today, Amazon (NASDAQ: AMZN) posted a strong Q3 and Wall Street cheered. 

Shares surged more than 13% in after-hours trading after the company smashed analyst expectations across revenue, profit and cloud growth.

💰 Big beats across the board

• Revenue: US$180.17 billion (vs US$177.8 billion expected)
• Earnings per share: US$1.95 (vs US$1.57 expected)
• AWS (Cloud) Revenue: US$33 billion, up 20.2% YoY – the fastest pace since 2022
• Ad Revenue: US$17.7 billion, up 26% YoY

CEO Andy Jassy flagged rising demand for cloud and AI infrastructure as a key tailwind, noting that AWS added 3.8 gigawatts of new capacity over the past year – a major buildout to meet surging compute demand.

⚙️ Project Rainier and AI strategy take shape

Amazon also officially launched Project Rainier, its new US$11 billion AI data centre purpose-built to run models from Anthropic, the maker of Claude. It’s part of a broader strategy to catch up to Microsoft and Google in the AI race… and early signs look promising.

Meanwhile, Amazon’s enterprise AI tools like Q (for business workflows) and Bedrock (a generative AI platform for cloud customers) are gaining traction. 

And on the consumer side, its Rufus shopping chatbot has seen uptake from 250 million users, with 60% more likely to complete purchases after using it.

🛒 Retail resilience and cost control

Amazon’s retail side isn’t lagging either. Its core e-commerce unit posted 10% sales growth, buoyed by July’s Prime Day and stable consumer demand despite tariff uncertainty.

Amazon lifted its full-year capex forecast to US$125 billion (up from US$118 billion) and expects Q4 revenue to hit US$206–213 billion, beating market forecasts at the midpoint. 

However, it also flagged trade policy risks as a potential wildcard, especially with Trump’s recent tariff escalations.

🔦  Some other things we’re shining the Spotlight on:

• ATLASSIAN’S GOOD NEWS: Atlassian jumped by as much as 11% in after-hours trading today after reporting Q1 FY26 revenue of US$1.4 billion, up 21% YoY. Investors were buoyed by progress on AI – with 3.5 million monthly active AI users, up 50% from the prior quarter.
• MICROSOFT’S CLOUD KEEPS CLIMBING: Microsoft (NASDAQ: MSFT) posted 40% growth in Azure and beat on revenue with US$77.67 billion, but shares slipped 4% after the company flagged higher capex ahead. It spent US$34.9 billion in Q1 alone, with more AI infrastructure investment expected. Net income hit US$27.7 billion, up 12% YoY.
• APPLE LOOKS TO A RECORD HOLIDAY: Apple (NASDAQ: AAPL) reported US$102.47 billion in Q4 revenue and EPS of US$1.85, beating estimates. Despite iPhone sales missing forecasts, the company guided for 10–12% YoY growth in the December quarter – potentially its best ever. Services revenue soared 15% to US$28.75 billion, lifting margins to 47.2%.

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