Meta Earnings Preview: AI Spending Surges as Investors Brace for Record CapEx and Ad Growth

Meta Platforms reports third-quarter earnings Wednesday after the close, and few companies carry more weight for both the market and the AI economy. As one of the top hyperscalers, Meta’s capital expenditures are now shaping global infrastructure demand and feeding the broader AI boom that’s driving data center construction and semiconductor spending worldwide. Over the past year, CEO Mark Zuckerberg has repositioned Meta from a social media giant to a hybrid AI and compute powerhouse, forming Meta Superintelligence Labs, announcing multibillion-dollar data center expansions like Hyperion, and even partnering with Arm and Blue Owl Capital to improve efficiency and financing for its vast infrastructure buildout. The company’s latest venture with Blue Owl involves a $27 billion data center project, where Meta retains a 20% stake and received a $3 billion cash distribution—a move that underscores how aggressively it is monetizing its infrastructure scale. Against this backdrop, investors want to see whether heavy AI investments are translating into measurable returns across its advertising ecosystem and emerging hardware platforms.

Analysts expect Meta to post earnings of roughly $6.70–$6.72 per share on revenue of about $49.5 billion, up roughly 10% year over year and 4% sequentially, with consensus looking for continued strength in advertising and engagement. Bank of America is more optimistic, calling for revenue of $50 billion and EPS of $7.30, above the Street’s $49.5 billion and $6.69, and expects a Q4 revenue guide between $55.5 and $59 billion (up 15–22% YoY). Analysts at Deutsche Bank argue Meta is set up well after lagging peers since Q2, noting strong ad checks showing accelerated spend in Q3 and only a “modest deceleration” in Q4. Sentiment into the report has been improving—shares have rebounded toward $750, up 28% year to date—as investors digest signs of higher ad demand and a more measured cost trajectory.

The key metric remains advertising revenue, which rose 21% year over year in Q2 to $46.6 billion and is expected to cross $47 billion in Q3. Ad impressions grew 11% and average price per ad rose 9% last quarter, and early checks suggest similar momentum. Citi’s tracking shows Instagram ad load up +230 bps quarter over quarter—the biggest gain since late 2022—and stronger click-through rates on Sponsored Reels. Combined with 3 billion monthly active users on Instagram and rising engagement on Facebook, analysts see continued share gains in digital advertising versus peers like Google and Amazon. Regional ad growth remains broad-based: Zacks estimates +25% in Europe, +20% in Asia-Pacific, and +24% in North America. The Street expects Family Daily Active People to hit 3.49 billion for Q3, up from 3.4 billion last quarter.

Where investors are watching most closely, however, is spending. CapEx totaled $17 billion last quarter, and Meta guided for $66 billion to $72 billion in full-year 2025 spending—already double last year’s levels. CFO Susan Li said CapEx will remain heavy again in 2026 as AI data-center construction accelerates, with “another year of similarly significant dollar growth.” Wells Fargo and Citi have both called this cycle one of the most aggressive infrastructure expansions in corporate history, rivaling the early hyperscaler buildout years. The new Blue Owl joint venture—where the fund contributed $7 billion in cash—appears designed to finance parts of this surge while reducing balance-sheet pressure. Investors will be watching for updated commentary on how Meta plans to manage CapEx intensity, financing partnerships, and return timelines for its AI infrastructure.

Zuckerberg and Li have framed the AI push as essential to product and revenue diversification. In Q2, Zuckerberg said, “Over the last few months, we've begun to see glimpses of our AI systems improving themselves… developing superintelligence, which we think is now in sight.” The company’s new Prometheus and Hyperion clusters will reach multi-gigawatt scale and serve both training and inference workloads across the Meta ecosystem. On the monetization front, management cited a 5% increase in time spent on Facebook and 6% on Instagram, with AI-driven ad targeting and recommendation systems boosting conversions by 3–5%. Over a “meaningful percent” of ad revenue now comes from AI-enhanced campaigns, and Meta’s Meta AI assistant and smart glasses are gaining traction as hardware extensions of its AI ecosystem.

Analysts are bullish across the board. Citi reiterates Meta as its Top Pick with a $915 price target, calling AI personalization “a multi-year monetization lever.” Mizuho initiated coverage with an Outperform and $925 target, projecting ad revenue growth of 18% annually through 2027 and FY27 ad sales of $265 billion (3% above consensus). Barclays maintains an $810 target, highlighting the potential for $6 billion and $19 billion in incremental ad revenue from WhatsApp and Threads by 2026 and 2027, respectively. Deutsche Bank and BofA both see favorable setup into the print amid solid data and sentiment improvement. Even with valuation stretching to ~23x 2026 earnings, analysts say Meta remains “reasonably priced for its AI leadership and growth visibility.”

Still, costs remain a talking point. Meta updated its 2025 expense outlook to $114–$118 billion and expects 2026 expense growth to run above 2025’s pace, driven mainly by infrastructure and compensation. Li confirmed the largest cost drivers are “compute capacity and talent,” though she added that ROI from AI ads is already materializing. Meta’s free cash flow stood at $8.5 billion last quarter despite record spending, and the company ended Q2 with $47 billion in cash, suggesting it can fund expansion without jeopardizing liquidity. The Street will look for any revised commentary on whether AI returns will become accretive to earnings sooner than 2027.

Last quarter’s momentum set a high bar. Total revenue rose 22% YoY to $47.5 billion, net income was $18.3 billion ($7.14 EPS), and operating margins climbed to 45%. Reality Labs posted a $4.5 billion loss, but Zuckerberg has argued its AR/VR and AI devices serve as long-term gateways to the AI internet. Family of Apps continued to carry the business with 53% margins. Free cash flow held steady as buybacks and dividends totaled over $11 billion. For Q3, management guided revenue between $47.5 and $50.5 billion and maintained that 2026 would be another year of “significant CapEx growth.”

The main risks are regulatory and execution-related. European authorities are reviewing Meta’s “Less Personalized Ads” offering, which could weigh on regional revenue as soon as this quarter. Meta also faces competitive pressures from OpenAI’s Sora and Google’s AI video efforts, though analysts believe engagement and scale insulate its core business. Management continues to warn of higher AI costs ahead but asserts these spending levels are crucial to lead the transition to agentic AI and superintelligence.

Bottom line: Meta enters earnings as a bellwether for the AI cycle and the digital ad economy. Wall Street expects a revenue beat, heavy CapEx, and more AI updates that justify its record spending. If Meta shows continued ad share gains and clarity on AI returns, the stock could reclaim momentum as the market’s defining AI hyperscaler story heading into 2026.