Meta Ads: The Machine That Over-Funds The AI Bet?

Meta’s strategy hinges on a clear trade-off: its highly profitable ads business is funding an aggressive surge in capex, primarily for AI infrastructure. The market is asking, "Is this working?”

Before the structural read, the accounting correction that matters most.

Meta reported $26.8B in net income and $10.44 diluted EPS. Both figures are distorted. The quarter includes an $8.03B one-time income tax benefit — a partial reversal of the $15.93B charge absorbed in Q3 2025 when the One Big Beautiful Bill Act was enacted. Strip it out:

Normalized net income: around $18.7B · Normalized EPS: about $7.31

That is still around 12% higher than Q1 2025. Strong — but not the earnings cliff the headline implies. The market will price the headline. The analyst should price the mechanism.