Meta's Q2 Earnings: The Beginning of a Bull Run?

Meta Platforms has increased the midpoint of its CapEx guidance, boosting the stock by double digits. The move is seen as a positive sign, with investors anticipating a bull run for the company.

Meta Platforms (META.O) has significantly increased its capital expenditure (CapEx) guidance, sending its stock surging by double digits in the premarket session. The move comes on the heels of the company's strong second-quarter earnings, which exceeded analysts' expectations. The increase in CapEx guidance is seen as a positive indicator by investors, who are anticipating a bull run for the company.

In its earnings call, Meta's CEO Mark Zuckerberg highlighted the importance of artificial intelligence (AI) in driving the company's core advertising business. The company's AI-driven ad tools have been instrumental in boosting revenue despite economic uncertainty. Zuckerberg noted that AI has made significant leaps possible in Meta's business, which relies heavily on selling ads on Facebook and Instagram.

Meta raised the bottom end of its annual CapEx forecast by $2 billion, to a range of between $66 billion and $72 billion. The company plans to spend higher capital expenses next year as it seeks to expand its data center infrastructure and employee compensation costs. The increased spending is aimed at poaching researchers with mega salaries and building out data center infrastructure to support its AI initiatives.

The company expects total revenue of $47.5 billion to $50.5 billion for the third quarter, compared with analysts' average estimate of $46.15 billion. This represents a significant upside to the Street's projections. Meta's AI-driven ad tools have driven about 5% more conversions on Instagram and 3% on Facebook, contributing to the strong revenue growth.

Investors have largely backed Zuckerberg's pursuit of superintelligence, pushing the company's stock up nearly a fifth so far this year. The post-market stock gains on Wednesday, along with those of Microsoft (MSFT.O), added a combined half a trillion dollars in stock market value.

The increased CapEx guidance and strong earnings have led analysts to reaffirm their bullish outlook on Meta. David Tran, an analyst at Seeking Alpha, believes there is little chance for a pullback after earnings and expects the stock to trade above mid-$700s in the near future.

Meta's aggressive pursuit of AI, including its investment in data centers and talent acquisition, has drawn questions and scrutiny from investors. However, the company's strong performance in the second quarter and the expected growth in the third quarter have eased some of these concerns.

The company's earnings come against a backdrop of regulatory challenges, including a lawsuit from U.S. antitrust regulators seeking to force Meta to restructure or sell Instagram and WhatsApp. The company has also faced criticism for its initial slow response to the competitive threat of TikTok.

Meta's AI-driven ad recommendations have been a key driver of its revenue growth. The company has introduced an AI-driven image-to-video ad creation tool under its Advantage+ suite, allowing marketers to generate video ads from static images. This tool has contributed to the company's strong ad conversion rates.

In conclusion, Meta Platforms' increased CapEx guidance and strong earnings have sent its stock soaring. The company's aggressive pursuit of AI, including its investment in data centers and talent acquisition, has driven its revenue growth and boosted investor confidence. However, the company's regulatory challenges and the competitive landscape remain significant risks.

References:
[1] https://www.reuters.com/business/media-telecom/meta-shares-jump-ai-fuels-ad-sales-outweighing-big-capital-costs-2025-07-30/
[2] https://seekingalpha.com/article/4806746-meta-q2-earnings-likely-just-the-opening-act-of-a-bull-run