Meta Platforms' Ad Revenue Growth Picks Up: More Upside Ahead?

Core Insights - Meta Platforms (META) generated significant revenue from advertising, with Q3 2025 advertising revenues accounting for 98.6% of Family of Apps revenues and 97.7% of total revenues, amounting to $50.08 billion, reflecting a 25.6% year-over-year increase [1][9] - The growth in advertising revenues was driven by a 14% increase in ad impressions and a 10% rise in average price per ad, attributed to improved ad performance and increased advertiser demand [2][9] - Meta's AI initiatives have enhanced advertising efficiency, with the annual run rate for AI-powered ad tools exceeding $60 billion by the end of Q3 2025 [3] Advertising Market Position - Meta, along with Alphabet and Amazon, is projected to capture over 50% of global ad spending in 2025, increasing to 56.2% in 2026, with a strong pipeline of ad opportunities on platforms like Threads and WhatsApp Status [4] - The adoption of META's Advantage+ creative suite is increasing, with a 20% sequential rise in advertisers utilizing its video generation features [4] Competitive Landscape - Meta faces stiff competition from Alphabet and Amazon, with Alphabet reporting Q3 2025 revenues of $74.18 billion (up 12.6% year-over-year) and Amazon's advertising revenues rising 24% year-over-year to $17.7 billion [5][6] - Both competitors are leveraging AI to enhance their advertising platforms, contributing to their revenue growth [5][6] Stock Performance and Valuation - META's stock has increased by 11.6% over the past 12 months, underperforming the broader Zacks Computer and Technology sector, which returned 27.9% [7] - The stock is trading at a forward price/sales ratio of 6.96, higher than the sector average of 6.61, indicating a premium valuation [11] - The Zacks Consensus Estimate for META's 2025 earnings is $28.17 per share, suggesting an 18.1% year-over-year growth [14]