Meta's Earnings Got a Major Tax Boost. Here Are the Adjusted Figures You Need to See.

Meta Platforms (NASDAQ: META) reported first-quarter 2026 results last week that, on the surface, looked spectacular. Revenue jumped 33% year over year to $56.3 billion -- an acceleration from the 24% growth the social media giant posted in the fourth quarter of 2025. And reported diluted earnings per share rocketed 62% to $10.44.

But the headline earnings figure deserves an asterisk. A large one-time tax benefit lifted reported profit by billions of dollars, and stripping it out tells a more sober story -- one in which earnings growth is trailing revenue growth meaningfully as Meta keeps escalating its already enormous spending plans.

That gap between revenue growth and adjusted earnings growth is worth a closer look.

Image source: Getty Images.

The numbers behind the asterisk

The good news first. Meta's first-quarter family of apps ad revenue rose 33% to $55 billion, fueled by a 19% jump in ad impressions and a 12% increase in average price per ad. Both metrics accelerated from the fourth quarter.

And Meta's operating income climbed 30% to nearly $23 billion, with operating margin holding steady at 41%.

So far, so good.

But further down the income statement, things get trickier.

Reported net income jumped 61% to $26.8 billion. The catch: Meta booked an $8.03 billion income tax benefit during the quarter, tied to U.S. Treasury guidance issued in February 2026 about how to treat previously capitalized research and development expenses. That benefit partially offsets the $15.93 billion non-cash tax charge Meta recorded in the third quarter of 2025, following the passage of the One Big Beautiful Bill Act.

Excluding the tax benefit, first-quarter net income would have been $18.7 billion. And earnings per share excluding the tax benefit would have been $7.31, compared with $6.43 in the year-ago period. That works out to adjusted earnings-per-share growth of about 14% -- well below the 33% revenue growth pace.

Weighing on its earnings growth is Meta's steep growth in total expenses. They climbed 35% year over year in the quarter -- outpacing revenue. Also affecting earnings, unrealized losses on equity investments dragged interest and other income to negative $1.1 billion.

In other words, the underlying business is growing nicely. But the company's bottom line is being weighed down by quickly rising costs and some non-operating headwinds.

Spending plans that keep getting bigger

This earnings-versus-revenue gap matters more than usual right now, because Meta is preparing to spend like never before.

In its first-quarter update, management raised its 2026 capital expenditures forecast to $125 billion to $145 billion -- up from a prior range of $115 billion to $135 billion. For context, full-year 2025 capital expenditures came in at about $72 billion. At the midpoint, the new range is nearly double last year's spending -- and more than 2024 and 2025 combined.

Meta said management's move to raise its forecast even more mostly reflects higher component pricing (memory in particular), as well as additional data center costs to build for future capacity.

Multi-year cloud deals and infrastructure purchase agreements also drove a $107 billion step-up in contractual commitments during the quarter alone -- a sign that more depreciation is on the way, which could pressure margins for years to come.

Meta CEO Mark Zuckerberg defended the buildup on the company's first-quarter earnings call, saying that Meta is "investing aggressively to meet our infrastructure needs and ensure we maximize our strategic flexibility over the coming years."

The CEO also emphasized efficiency, citing the rollout of more than a gigawatt of Meta's own custom silicon. And, during the call, the company confirmed plans to reduce its employee base this month.

"We believe a leaner operating model will allow us to move more quickly while also helping to offset the substantial investments we're making," explained Meta chief financial officer Susan Li during the company's earnings call when explaining its plans to cut its headcount in May.

With a forward price-to-earnings ratio of only 20.5 as of this writing, the market seems to be largely aware of the company's slow earnings growth compared to revenue. In other words, I believe the stock is appropriately priced in light of the company's unique combination of rapid revenue growth and massive spending.

Overall, the stock could be attractive at this level, particularly given Meta's accelerating ad business and its reasonable valuation. But ramping spending means this is a high-risk stock right now -- and investors should keep any position in it modest.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.