Finance
Meta shares jump as AI fuels ad sales, outweighing big capital costs
Published by Global Banking and Finance Review
Posted on July 30, 2025
5 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on July 30, 2025
5 min readLast updated: January 22, 2026
Meta's AI-driven ad revenue surge boosts stock value despite rising capital costs, with a promising revenue forecast exceeding expectations.
By Echo Wang and Jaspreet Singh
(Reuters) -Meta Platforms forecast third-quarter revenue well above analysts' estimates on Wednesday, as artificial intelligence once more powered its core advertising business, sending its shares soaring 11% in extended trading.
The bumper results could ease investor worries about the social media giant's frenzied pace of spending, at least for now, as it seeks to change Wall Street's impression that it lags rivals including Microsoft and Alphabet's Google in the AI race.
Meta raised the bottom end of its annual capital expenditures forecast by $2 billion, to a range of between $66 billion and $72 billion, as CEO Mark Zuckerberg told analysts on a call that AI was making big leaps possible in its business that makes money by selling ads on Facebook and Instagram.
Rising costs to build out data center infrastructure and employee compensation costs - Meta has been poaching researchers with mega salaries - would push the 2026 expense growth rate above the pace in 2025, Meta said. The company is planning higher capital expenses next year as well.
"I think there are all these questions that people have about what are going to be the timelines to get to really strong AI or superintelligence ... we've observed the more aggressive assumptions, or the fastest assumptions, have been the ones that have most accurately predicted what would happen. I think that that just continued to happen over the course of this year too," Zuckerberg said on a conference call with analysts.
Investors have largely backed Zuckerberg's pursuit of superintelligence - a hypothetical concept where AI surpasses human intelligence in every possible way - pushing the company's stock up nearly a fifth so far this year.
Meta's post-market stock gains on Wednesday, along with those of Microsoft's, added a combined half a trillion dollars in stock market value.
Microsoft said on Wednesday it expects capital expenditure to exceed $30 billion in its fiscal first quarter, far above analysts' estimate of $23.75 billion. At that pace, the company would spend roughly $120 billion on AI this fiscal year.
The update came a week after Google parent Alphabet raised its capital spending plans for the year to about $85 billion and signaled more to come next year to meet surging demand for AI services.
'PUSH VERY AGGRESSIVELY'
For the third quarter, Meta said it expected total revenue of $47.5 billion to $50.5 billion, compared with analysts' average estimate of $46.15 billion, according to data compiled by LSEG. Its third-quarter guidance assumed a 1% benefit from a weak dollar. It said year-over-year revenue growth in the fourth quarter would be slower than in the third quarter.
"AI-driven investments into Meta’s advertising business continue to pay off ... But Meta’s exorbitant spending on its AI visions will continue to draw questions and scrutiny from investors who are eager to see returns," Emarketer senior analyst Minda Smiley said.
She noted that the company's earnings "come against a backdrop of regulatory challenges that Meta faces in the U.S. and abroad, adding more uncertainty to its future."
U.S. antitrust regulators have sued Meta to force it to restructure or sell Instagram and WhatsApp, claiming the company sought to monopolize the market for social media platforms used to share updates with friends and family. With court papers due in September, the judge overseeing the case is unlikely to rule until later this year at the earliest.
Zuckerberg testified in April that the company was initially slow to recognize the competitive threat of TikTok, and that Meta has over the years tried to build many apps that never gained traction.
The founder-CEO has pledged to spend hundreds of billions of dollars to build massive AI data centers, having shelled out $14.3 billion for a stake in startup Scale AI and poached its 28-year-old billionaire CEO, Alexandr Wang.
After a lackluster reception for its Llama 4 model that led to staff departures, Meta has tried to revitalize its AI push by sparking a high-stakes talent war in which it has doled out more than $100 million in pay packages to researchers from rival firms.
“We’re just going to push very aggressively on all of that,” Zuckerberg said on the conference call, referring to Meta’s AI strategy.
In the second quarter, AI-powered ad recommendations drove about 5% more conversions on Instagram and 3% on Facebook, the company said. Ad conversions refer to a user making a purchase or a commitment after clicking or viewing an ad.
The tech giant recently introduced an AI-driven image-to-video ad creation tool under its Advantage+ suite, allowing marketers to generate video ads from static images.
Meta reported revenue of $47.52 billion for the quarter ended June 30, which surpassed analysts' average estimate of $44.80 billion. Profit per share of $7.14 for the second quarter also exceeded estimates of $5.92.
Instagram, whose Reels product competes with ByteDance's TikTok and YouTube Shorts for ad dollars in the popular short video format, is set to account for more than half of Meta's ad revenue in the U.S. this year, according to eMarketer.
(Reporting by Echo Wang in New York, Jaspreet Singh in Bengaluru and Kenrick Cai in San Francisco; Additional reporting by Jody Godoy in Washington; Editing by Tasim Zahid, Sayantani Ghosh, Matthew Lewis and Stephen Coates)
Meta expects total revenue of $47.5 billion to $50.5 billion for the third quarter, exceeding analysts' average estimate of $46.15 billion.
AI-driven investments have led to about 5% more conversions on Instagram and 3% on Facebook, indicating a positive effect on ad performance.
Meta raised its annual capital expenditures forecast by $2 billion, raising concerns about its high spending pace amidst regulatory challenges and competition.
Meta is facing regulatory scrutiny from U.S. antitrust regulators and competition from platforms like TikTok, which adds uncertainty to its future.
Zuckerberg emphasized that Meta will 'push very aggressively' on its AI strategy, reflecting the company's commitment to advancing its AI capabilities.
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