Source: PaxForex Premium Analytics Portal, Fundamental Insight
Meta Platforms shares slipped after the release of its third-quarter results, even though the company reported record-breaking revenue that outpaced expectations. The earnings report shifted investor focus to Meta’s spending plans, as the company announced intentions to boost capital expenditures (capex) to seize artificial intelligence (AI) opportunities.
In Q3, Meta achieved record performance with a 19% year-over-year revenue rise, reaching $40.6 billion. Advertising revenue climbed nearly 19% to $39.9 billion, while Reality Labs, its division for the metaverse and augmented reality, posted a 29% year-over-year increase in revenue to $270 million. Operating income from Meta's app suite hit $21.8 billion, although Reality Labs reported a $4.4 billion loss. Earnings per share (EPS) jumped 37% year-over-year to $6.03.
The company’s "Family daily active people" (DAP) - a measure of daily user engagement across its apps - increased by 5% year-over-year to an average of 3.29 billion in September, slightly below the 3.31 billion projected by analysts. Average revenue per person (ARPP) grew 12% to $12.29. Ad impressions rose by 7%, and the average price per ad went up 11%, with the Asia Pacific region driving much of this growth.
Threads, Meta’s latest app, reached nearly 275 million monthly users during the quarter, averaging about 1 million new users per day. Meta plans to expand Threads' features to attract users interested in following specific topics, aiming to position it as a leading social media platform.
WhatsApp continued to gain popularity in the US and recently achieved 2 billion daily calls globally. Additionally, Meta reported encouraging engagement trends among young adults on Facebook in the US, while Instagram’s Reels feature maintained strong performance, supported by a focus on original content.
For the fourth quarter, Meta forecasted revenue between $45 billion and $48 billion, with a midpoint of $46.5 billion, slightly above the analyst consensus of $46.2 billion. The company also raised its full-year capex forecast to between $38 billion and $40 billion, up from previous guidance of $37 billion to $40 billion, with further increases anticipated in 2025. CEO Mark Zuckerberg highlighted that investments in AI and infrastructure are crucial for future growth.
Meta noted that AI is boosting both user engagement and time spent on its platforms, while also helping advertisers improve ad performance and conversion rates. The company’s large language model, Llama, has shown rapid growth in token usage, with Llama 4 currently in training using over 100,000 Nvidia H200 GPUs.
Meta’s hefty spending to support future growth, especially in Reality Labs and AI, continues to be a focus. Reality Labs has weighed on the company financially, yet AI investments are already yielding positive outcomes. While the long-term potential of Reality Labs remains uncertain, Meta has a history of growing platforms that prioritize user acquisition before profitability, a strategy that worked successfully with Facebook and Instagram.
Meta stands to gain from its AI advancements, which are enhancing user engagement and driving ad revenue. With a forward price-to-earnings (P/E) ratio of around 23 based on 2025 projections, Meta currently offers an attractive investment prospect.
Backed by its dedication to innovation and strategic spending, Meta has consistently demonstrated its ability to foster long-term growth. For investors, this recent dip in stock price may provide an appealing entry point, as Meta's ongoing investment in AI and user engagement solidifies its position for future success.
As long as the price is above 560.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 566.19
- Take Profit 1: 600.00
- Take Profit 2: 620.00
Alternative scenario:
If the level of 560.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 560.00
- Take Profit 1: 545.00
- Take Profit 2: 530.00
