Is Meta Platforms Stock a Smart Buy Before Q3 Earnings Report?

Core Insights - Meta Platforms (META) is expected to report third-quarter 2025 results on October 29, with projected revenues between $47.5 billion and $50.5 billion, reflecting a year-over-year increase of approximately 21.8% [1][9]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for third-quarter revenues is $49.43 billion, indicating a 21.8% increase from the previous year's figure [2]. - The consensus estimate for earnings per share stands at $6.60, suggesting a growth of 9.5% year-over-year [2]. Advertising Revenue Growth - Strong advertising revenue growth is anticipated, with estimates for third-quarter advertising revenues at $48.5 billion, representing a 21.6% year-over-year increase [7]. - Meta's platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads, reach over three billion users daily, enhancing its position in the digital ad market [8]. AI and User Engagement - Meta is leveraging AI and machine learning to enhance its social media offerings, which is expected to drive user engagement and advertising effectiveness [9][18]. - The company has introduced new features to improve user experience and engagement across its platforms [10][20]. Financial Performance and Market Position - Meta's Family of Apps is projected to generate an operating income of $24.86 billion, indicating a 14.1% year-over-year growth [10]. - The Reality Labs segment is expected to incur a loss of $5.58 billion, which is wider than the previous year's loss of $4.43 billion [11]. Stock Performance - META shares have increased by 25.3% year-to-date, outperforming the Zacks Computer & Technology sector's growth of 22.9% [12]. - Despite this, META's current valuation is considered stretched, trading at a forward price/sales ratio of 8.35X, higher than the sector average of 6.88X [15]. Strategic Initiatives - The company is focusing on improving security across its platforms, which is expected to enhance user engagement [20]. - The introduction of Teen Accounts on Instagram and other platforms aims to boost security and user experience [21]. Conclusion - META's strategic use of AI and focus on enhancing user engagement are expected to drive top-line growth, justifying its premium valuation [22].