Meta’s Q3 Showdown: Can AI Spend and Ad Growth Drive Another Rally?

Date/Time: Oct. 29, 2025 – Meta Platforms (NASDAQ:META) reports Q3 results after market close.
Earnings Forecast: Analysts expect ~$49.5B revenue (+21–23% YoY) and ~$6.7 EPS ^[1] ^[2].
Stock Price: META shares are near record highs (mid-$700s range); up ~25% YTD ^[3]. Over 40 analysts rate it a “Buy” (avg. 12-month target ~$825–$875) ^[4] – with Bank of America at $900 ^[5] and JPMorgan at $875 ^[6].
AI Investment: Meta is pouring resources into AI – capex is expected ~$66–72B in 2025 (to build data centers, chips, etc.) ^[7]. It already spent $14B on a ScaleAI stake ^[8], plans a $27B AI data-center JV (80% funded by Blue Owl Capital) ^[9], and is acquiring AI chipmaker Rivos (~$2B) ^[10].
New Products: Launched the $799 Ray-Ban Meta “Display” AR smart glasses at Connect 2025 ^[11]; expanding AI-driven ads on Instagram/WhatsApp/Threads ^[12]; Meta AI chatbot now has 1B+ users ^[13].
Watchpoints: Ad demand and pricing, engagement on Reels/Instagram, Reality Labs losses, and guidance on spending will drive the reaction. EU regulators are probing Meta’s moderation/data practices under the Digital Services Act ^[14].
Analyst Views: Bank of America expects Meta’s 23% ad revenue growth vs. 13% for Google ^[15]. JPMorgan calls META a “top pick,” praising AI-powered ads and Reels ^[16]. CFRA forecasts ~21–22% Q3 growth and sees AI spend at $66–72B ^[17].

Meta’s Q3 Preview: Riding the AI Wave

Meta will release its Q3 2025 earnings Wednesday after the close. Wall Street’s consensus sees ~$49.5 billion revenue and ~$6.7 EPS ^[18] ^[19]. That implies roughly 22% organic growth – fueled by a rebound in ad spending and AI-driven ad targeting. (By comparison, in Q2 Meta reported $47.52B revenue, +22% YoY ^[20].) Management guided Q3 revenue at $47.5–50.5B ^[21], so analysts’ estimates are near the top end of that range.

Investors will scrutinize advertising trends in the quarter. Meta’s business is still 98% ads, and “AI-powered recommendation models drove 5% more conversions on Instagram and 3% on Facebook” in Q2 ^[22]. Facebook and Instagram user engagement grew 5–6% in Q2 thanks to better content suggestions ^[23]. Q3 will test if this momentum holds. Key metrics include ad impressions, average prices, and growth on Reels (short video) and Stories. The company has also begun monetizing new surfaces – for example, it has started showing ads on Threads and WhatsApp ^[24] and even piloting ads in WhatsApp channels. IG notes that “Other revenue from the Family of Apps…grew 50% in Q2” from newer initiatives (paid WhatsApp messaging, etc.) ^[25].

Bank of America analysts highlight that Meta will report alongside Alphabet and see who outperforms: “Meta should compare well – we expect 23% y/y growth vs. 13% for Google properties in 3Q” ^[26]. JPMorgan’s Doug Annuth is bullish on Meta’s AI-driven ads and Reels strategy, calling META a “top pick” ^[27]. CFRA likewise forecasts ~21–22% growth ^[28]. In short, Wall Street is banking on Meta’s core ad engine (with AI enhancements) to stay strong.

AI Spending on Steroids – The Infrastructure Build

Meta’s AI push is unprecedented. The company has signaled it will spend $66–72 billion on capital expenditures in 2025, nearly double prior years ^[29]. Much of that is to build out AI datacenters (new “titan clusters”) and custom chips. For example, Meta announced a $27 billion joint venture with Blue Owl Capital to fund the new “Hyperion” AI data center campus in Louisiana. Blue Owl’s funds will own 80% of Hyperion (providing ~$7B upfront) while Meta keeps 20% ^[30]. CFO Susan Li said this was “a bold step forward” for Meta’s AI infrastructure.

Meta is also building its own silicon. In October it agreed to acquire Rivos, a startup making RISC-V AI chips, for about $2B ^[31]. This should accelerate development of Meta’s own training/inference chip designs (the “MTIA” project) and reduce reliance on Nvidia GPUs. Meta’s engineering team says the Rivos talent will be folded into their AI semiconductor roadmap ^[32].

On the software side, Meta is integrating AI throughout its products. Its Meta AI chatbot now has over 1 billion monthly users ^[33], and the company will soon feed those AI interactions into advertising. Starting Dec. 16, 2025, Meta will begin using data from users’ chats with its Meta AI assistant to personalize their Facebook/Instagram feed and ads ^[34]. Users will be notified of this (there is no opt-out except avoiding AI features), except in regions with stricter laws (EU/UK/S. Korea) ^[35]. Meta describes a scenario where a chat about hiking could later serve related posts or ads in your feed. The move aims to leverage Meta’s >1B AI users to boost engagement and ad revenue – although privacy advocates are watching closely ^[36].

All this investment has raised concerns about margins. IG’s analysis pointed out that year-to-date capex through June was already $30.7B – nearly double last year – and full-year capex is still seen at $66–72B ^[37]. Operating margin is expected to dip from 43% a year ago to ~38.7% in Q3 ^[38], reflecting heavy spending. Investors will want to see proof that these AI dollars pay off – for now, the expectation is that better ads and efficiency justify the cost.

Ad Rebound, New Audiences, and Products

Meta’s core ad business appears healthy. In Q2, U.S. digital ad spending resumed growth, and Meta took share with stronger pricing. It reported 22% revenue growth (47.52B) in Q2 ^[39], far above Street forecasts. In July, after Q2 earnings, Meta stock jumped 11% on the back of that beat ^[40]. The company has also focused on monetizing short video: Reels ads and “sticky” AI ad formats are intended to capture more marketing budgets.

Beyond ads, Meta is accelerating “AI devices” and other products. At its late-September Meta Connect event, Zuckerberg unveiled the new Ray-Ban Meta Display smart glasses – the first consumer AR glasses from Meta – priced at $799 ^[41]. They can overlay navigation, calls, and alerts in your view, and Zuck described them as a step toward “personal superintelligence.” (Notably, the onstage demo had glitches – a reminder the tech is early.) Sales of Meta’s Ray-Ban smart glasses have reportedly more than tripled year-over-year in H1 2025 ^[42], as the company ramps production. Meta also showcased new AI eyewear features and an “Oakley Meta” band to pair with AR glasses ^[43]. Meanwhile, its Quest VR headset business (Reality Labs) continues to lose money on R&D, but incremental AR hardware progress is encouraging ^[44].

In addition, Meta is starting to monetize messaging apps. WhatsApp is adding targeted ads (in Status updates and channels), and Meta is trialing ads in Threads. IG notes that “Other Family of Apps” (including WhatsApp and Threads) revenue grew ~50% in Q2 ^[45] thanks to new initiatives like paid WhatsApp Business features and subscriptions. The goal is to broaden revenue beyond core News Feed ads, which still make up ~98% of sales ^[46]. Investors will watch if these new formats scale.

Analyst & Expert Commentary

Most analysts remain bullish on Meta’s outlook. As TS2.Tech reports, over 40 analysts rate META a Buy, with average targets about $825–$875 ^[47] (roughly 10–20% above current levels). For example, Bank of America’s team notes that Meta’s advertising engine is strong: “Meta should compare well – we expect 23% y/y growth vs. 13% for Google properties in 3Q,” they wrote ^[48]. They also emphasize Meta’s AI tools (better targeting, CRM integration, etc.) could give it an edge. JPMorgan’s Doug Annuth similarly calls Meta a “top pick,” praising its AI-powered ads, Reels, and strong execution of strategy ^[49]. CFRA is also upbeat, saying Meta’s AI investments should let it outpace the broader ad market – they see ~21–22% Q3 growth ^[50].

Price targets have been rising. BofA’s $900 target (19% upside) ^[51], JPMorgan’s $875 (15% upside) ^[52], and CFRA’s $880 (16%) ^[53] all suggest analysts expect continued gains if guidance holds. TS2.Tech adds that analysts at firms like Mizuho, Cantor Fitzgerald and Barclays range from low-$800s to the high-$900s on META ^[54]. (Notably, 247wallst.com notes CFRA and Cantor reaffirming buy with ~$900 targets.)

However, some experts urge caution. Meta’s AI/metaverse bets are extremely costly. Market researchers like eMarketer point out that competing directly with OpenAI is “more challenging while costing it billions of dollars” ^[55]. And Meta’s Reality Labs (AR/VR) is still a huge cash drain. Investors will want clear guidance that operating margins can weather these investments.

Regulatory & Macro Factors

On the regulatory front, Meta faces scrutiny especially in Europe. In mid-October EU regulators flagged Meta for preliminary Digital Services Act violations, saying Facebook/Instagram don’t yet offer easy ways for users to report illegal content or appeal moderation decisions ^[56]. The EC also found Meta isn’t giving outside researchers required data access under new EU rules, risking fines if unresolved ^[57]. Such issues could create new costs or constraints. In the U.S., a recent class-action case was dismissed: a federal judge threw out an antitrust suit accusing Meta of misleading users about data use ^[58], removing a trial that had been scheduled for November.

Macro tailwinds may help Meta. Tech stocks are riding an AI-driven rally. As Reuters notes, “Microsoft, Meta and Alphabet report earnings updates after Wednesday’s market close” just as the Fed is widely expected to cut rates ^[59]. Indeed, the Nasdaq 100 is near all-time highs, and Meta’s peers like Apple, Google, and NVIDIA are buoyant. This positive backdrop has lifted META (up ~25% YTD) ^[60].

What’s Next: Forecast and Outlook

Going into the report, Meta has three main jobs: 1) keep its ad growth steaming ahead, 2) convince investors its AI spend is translating into product improvements (not just costs), and 3) set expectations on future spending. Management guidance on Q4 and 2026 capex will be crucial. The company’s official Q3 guidance (Oct 1 press release) was already broad, so any color on AI projects or expense trends will move the stock.

If results beat: we could see META continue its rally. The stock is already within striking distance of its $796 all-time high (Aug 15) ^[61] ^[62]. A beat might validate the high price targets (to $900 or more) and reinforce Meta’s 25%+ rally this year. A miss, or weak guidance, could cause a pullback given how high expectations are. In a neutral case, much will hinge on the earnings call tone: will Zuckerberg and CFO Susan Li sound confident about AI ROI and ad demand? Investors will be listening for reassurance.

In sum, Meta’s Q3 is a milestone: it doesn’t need to prove its long-term AI vision in one quarter, but it does need to show that the core ad machine is growing and that the new AI bet isn’t derailing results. As TS2.Tech summarizes, the “balance of opinion” is that Meta’s vast user base and ad platform give it the fuel to keep innovating ^[63]. For now, Wall Street seems to agree – analysts remain mostly bullish, and even a cautious-quarter outcome could be spun as a solid execution under heavy investment.

Sources: Industry reports and analysis (Business Insider ^[64] ^[65], TS2.Tech ^[66] ^[67], Reuters ^[68], IG ^[69], Tastytrade ^[70], NAI500 ^[71], etc.) were used to compile this report. All data and quotes are cited from these sources.

Meta sets big AI advertising goals

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