Meta Platforms Inc., the parent company of social media giant Facebook, made an important financial decision in late January that is poised to significantly boost its bottom line in 2025. Rather than introducing a groundbreaking new product or initiating company-wide cost cuts, Meta made a subtle yet impactful adjustment to its accounting formula, specifically in relation to its artificial intelligence (AI) infrastructure. This tweak is expected to reduce Meta’s depreciation expense by $2.9 billion in 2025, marking a noteworthy financial shift that will have a substantial impact on the company’s profits.
Table of Contents
What’s Changing in Meta’s Accounting?
Meta’s adjustment, disclosed on January 29, 2025, revolves around the depreciation of its servers and networking assets, which are crucial for powering its vast AI infrastructure. Historically, the company had used a depreciation period ranging from four to five years for its AI-related servers. However, the new accounting method extends the so-called “useful life” period of certain servers and networking equipment to five and a half years.
At first glance, this may seem like a minor shift in accounting policy. Yet, when you consider the scale of Meta’s investments in AI infrastructure, the effects of this adjustment become clear. Meta’s infrastructure investments run into billions of dollars, and extending the useful life of its servers by even a few months has the potential to save the company a significant amount in depreciation expenses.
The Financial Impact: A $2.9 Billion Boost
Meta’s decision to extend the useful life of its AI servers is expected to reduce the company’s depreciation expense by $2.9 billion in 2025. This reduction in depreciation alone could account for nearly 4% of Meta’s projected pre-tax profits for the year. For a company of Meta’s size, such adjustments have a far-reaching impact on financial performance. The reduced depreciation expenses will directly enhance Meta’s reported profit margins and contribute positively to its earnings.
The significance of this financial shift is amplified by Meta’s aggressive spending on AI infrastructure. The company plans to significantly increase its capital expenditures (CapEx) this year, with an estimated 75% boost in spending compared to previous years. Given the immense capital being funneled into AI operations, the effects of this accounting change will likely have an even larger impact in the years to come, especially in 2026.
Why Meta is Extending the Life of Its Servers
The change reflects a broader trend in the tech industry as companies continue to grapple with the rapid pace of technological advancements and the need for high-performance computing. AI infrastructure, including powerful servers and advanced networking gear, tends to depreciate quickly due to the frequent introduction of faster, more capable hardware. However, Meta, along with other major players in the tech world, is now re-evaluating how long these assets can actually serve their purpose.
By extending the useful life of its servers, Meta is essentially acknowledging that the equipment may remain valuable for a longer period than previously thought. This could be due to several factors, including improved durability of the hardware or more efficient ways of utilizing older equipment in AI models. The shift reflects the evolving understanding of how AI infrastructure can remain operational and efficient even as newer technologies emerge.
While this move will benefit Meta’s short-term financial results, it is also likely a result of careful analysis of how its servers and networks are being used. If these assets prove to be more robust than anticipated, the longer depreciation period could help the company optimize its spending and preserve capital for other strategic initiatives.
Industry Trends: Not Just Meta
Meta is not the only tech giant making adjustments to its depreciation schedules. In fact, the shift in how companies approach the depreciation of their servers is becoming a trend among major players in the tech sector.
For instance, Microsoft made a similar move in 2022 when it extended the useful life of its server and networking equipment from four years to six years. In 2023, Oracle followed suit, raising its depreciation timeline from four years to five. These decisions reflect the broader challenge that companies face in balancing the need for cutting-edge technology with the reality that hardware investments are costly and have a finite life span.
On the other hand, some companies, like Amazon, have taken a different approach. In early 2025, Amazon reduced the estimated lifespan of its server equipment, cutting it from six years to five. This decision, according to Amazon, will result in a $700 million decrease in operating income. Unlike Meta’s strategy, which focuses on maximizing the utility of existing hardware for a longer period, Amazon’s move indicates a shift toward quicker turnover of its infrastructure, possibly driven by its focus on rapidly evolving AI and cloud services.
The Role of Depreciation in Tech Companies’ Financial Health
Depreciation plays a critical role in the financial health of capital-intensive companies, particularly those in the tech sector. Unlike industries like real estate, where assets such as buildings tend to retain their value over time, technology assets lose their value much faster. This is primarily due to the rapid pace of innovation, which leads to older models becoming obsolete in a short period.
In this context, depreciation is a non-cash expense, meaning it doesn’t directly impact a company’s cash flow. Instead, it reduces taxable income, which can influence reported profits. However, because depreciation schedules are based on estimates of how long assets will last, they can be adjusted by companies to reflect actual usage and expected future value.
For tech companies like Meta, Microsoft, and Amazon, adjusting depreciation schedules is one of the most effective ways to boost earnings. By extending the useful life of their infrastructure, these companies can significantly reduce their depreciation expenses and, in turn, report higher profits. This is particularly important in a competitive industry where profit margins are closely watched by investors.
The Bigger Picture: Meta’s AI Investments
Meta’s decision to extend the life of its servers comes at a time when the company is making large-scale investments in artificial intelligence. The tech giant is doubling down on AI, with plans to increase its capital expenditures by 75% this year. Meta is betting on AI to drive future growth, and it is investing heavily in the hardware and software necessary to compete in this rapidly evolving market.
The company’s AI infrastructure is crucial to its ambitions, as it powers everything from content moderation to advanced machine learning models. By investing in more efficient and cost-effective hardware, Meta hopes to build a more sustainable AI ecosystem, one that will serve as a foundation for future innovations.
The Investor Perspective
Despite the increased spending and the impact of depreciation on profits, investors appear to be optimistic about Meta’s AI strategy. The company’s stock has performed well, with Meta’s shares hitting a record high as investors react positively to the company’s AI-driven growth prospects. Meta’s recent earnings call highlighted the efficiencies gained through its extended depreciation schedules, further boosting investor confidence.
In fact, Me-ta shares have seen a remarkable rise, closing higher for 17 consecutive days as of early February. Investors are clearly focused on the potential long-term growth driven by Meta’s AI initiatives, rather than short-term fluctuations in depreciation expenses.
Conclusion
Me-ta’s decision to extend the depreciation timeline of its AI infrastructure is a strategic move designed to reduce expenses and improve profitability in the short term. The financial impact of this change is significant, with the company projecting a $2.9 billion reduction in depreciation expenses for 2025 alone. As AI continues to shape the future of Me-ta and other tech giants, this adjustment reflects a broader trend in the industry of re-evaluating how long expensive hardware can remain useful in an era of rapid technological advancement.
While the decision may seem minor on the surface, it speaks to the complex financial strategies employed by companies in capital-intensive sectors. As Meta and other tech companies invest billions into AI, adjusting depreciation schedules will likely become an increasingly important tool in managing profitability and delivering shareholder value.
1 thought on “Meta Platforms Adjusts Accounting Formula on AI Servers, Projecting Billions in Profit Boost 2025”