29 October 2025 | 4:42PM EDT Equity Research Meta Platforms Inc. (META): Q3 '25 Earnings First Take We expect investors to have a muted to negative initial reaction to META's Q3 '25 earnings report on the back of slightly raised 2025 opex and capex framework but, more importantly, company commentary that opex dollar growth and capex dollars YoY will be notably higher in 2026 (over 2025) than in 2025. Investor conversations in the weeks leading up to this earnings report were most fearful of a pace/cadence o ...

Core Insights - Meta is now offering lower salary packages for positions in its Super Intelligence Lab, with product operations manager roles offering total compensation between $120,000 and $177,000 per year, significantly less than the previously reported high salaries for top talent [1][4][8] - The hiring strategy appears to shift from attracting high-profile talent to filling more standard roles, indicating a potential change in the company's recruitment focus [1][9] Salary and Recruitment Trends - The salary range for product managers at Meta typically falls between $160,000 and $310,000, highlighting the disparity in compensation for the new roles being offered [4][8] - The recruitment for the Super Intelligence Lab aims to find individuals who can coordinate between clients and partners, focusing on AI model development [6][9] Job Responsibilities and Qualifications - The product operations manager role involves ensuring the successful launch of AI products, analyzing data for business insights, and improving operational processes [6][7] - Candidates are expected to have a bachelor's degree and at least six years of experience, with additional qualifications such as experience in data pipeline construction and cross-functional collaboration being advantageous [7][9] Company Strategy and Market Position - The overall size of the new AI department has reportedly grown to over 2,500 employees, suggesting a significant investment in AI despite the lower salary offers for certain roles [9][10] - The current market valuation of Meta is implied to be a factor in the compensation structure, with the company possibly adjusting its offers in response to broader market conditions [10]

Summary of Meta Platforms Inc. (META) Q2 '25 Earnings Call Company Overview - **Company**: Meta Platforms Inc. (META) - **Industry**: Digital Advertising and Technology Key Financial Performance - **Q2 '25 Total Revenues**: $47.52 billion, exceeding estimates (Goldman Sachs estimate: $45.04 billion, FactSet Street estimate: $44.77 billion) with a year-over-year growth of +22% [2] - **Family of Apps Revenues**: $47.15 billion, also +22% YoY [2] - **Reality Labs Revenues**: $370 million, +5% YoY [2] - **Total Daily Active Users**: 3.48 billion [2] - **GAAP Operating Income**: $20.44 billion, representing a 43% operating margin [2] - **GAAP EPS**: $7.14, surpassing estimates (Goldman Sachs estimate: $6.06, Street estimate: $5.87) [2] Revenue Breakdown - **Advertising Revenues**: $46.56 billion, +21% YoY, with regional breakdown: - US & Canada: $20.05 billion - Europe: $11.37 billion - Asia: $9.15 billion - Rest of World: $6.00 billion [2] Guidance and Future Expectations - **Q3 '25 Revenue Guidance**: $47.5-50.5 billion, above pre-earnings estimates [3] - **FY2025 Total GAAP Expenses Guidance**: $114-118 billion, revised from previous guidance [5] - **FY2025 Capex Guidance**: $66-72 billion, also revised upward [5] - **2026 Expense Growth Expectation**: Anticipated to grow faster than 2025 due to employee growth and costs [1] Strategic Focus Areas - Emphasis on AI initiatives and their impact on digital advertising [1] - Monitoring shifts in short-form video consumption and monetization [1] - Investment in mixed reality and spatial computing [1] Risks and Challenges - Competition for user growth and advertising dollars [6] - Potential margin depression due to large investments in long-term initiatives [6] - Regulatory scrutiny and challenges in monetizing new opportunities [6] Valuation and Price Target - **12-Month Price Target**: $775, indicating a potential upside of 10.7% from the current price of $700 [7] Additional Insights - Meta's revenue performance was notably driven by strong growth in ad impressions (+11% YoY) and pricing (+9% YoY) [1] - The company is expected to continue substantial investments in capital expenditures, aligning with its growth strategy [1] This summary encapsulates the key points from the earnings call, highlighting Meta's financial performance, future guidance, strategic focus, and associated risks.

Core Viewpoint - Meta's Q2 performance exceeded expectations with a revenue of $47.5 billion, a year-on-year increase of 22%, and an operating profit of $20.4 billion, surpassing forecasts by 19% [1] Group 1: Financial Performance - Revenue for Q2 reached $47.5 billion, representing a 22% year-on-year growth and exceeding expectations by 6% [1] - Operating profit was reported at $20.4 billion, which is 19% above market expectations [1] Group 2: Growth Drivers - The strong growth was primarily driven by advertising revenue from the Family of Apps [1] - Daily active users increased by 6% year-on-year, reaching 3.48 billion [1] - Ad impressions grew by 11% year-on-year, while the average price per ad rose by 9% [1] Group 3: Analyst Recommendations - The company is the top pick in the industry according to the report, with the target price raised from $759 to $866 [1] - The acceleration in growth confirms the sustained robust growth in user and advertising revenue driven by AI, alleviating concerns over capital expenditures [1] - The rating for Meta is "Buy" [1]

Core Viewpoint - Meta's Q2 performance exceeded expectations with a revenue of $47.5 billion, representing a 22% year-over-year increase, and an operating profit of $20.4 billion, surpassing forecasts by 19% [1] Group 1: Financial Performance - Revenue for Q2 reached $47.5 billion, exceeding expectations by 6% [1] - Operating profit was $20.4 billion, which was 19% above forecasts [1] Group 2: Growth Drivers - Strong growth was primarily driven by advertising revenue from the Family of Apps [1] - Daily active users increased by 6% year-over-year to 3.48 billion [1] - Ad impressions rose by 11% year-over-year, while the average price per ad increased by 9% [1] Group 3: Analyst Recommendations - The company is the top pick in the industry according to the report [1] - Target price has been raised from $759 to $866, indicating a positive outlook [1] - The rating is "Buy," reflecting confidence in sustained growth driven by AI [1]

Financial Performance - Meta reported total revenue of $42.314 billion for Q1 of fiscal year 2025, a 16% increase from $36.455 billion in the same period last year, with a 19% growth rate when adjusted for constant currency [3] - Net profit surged from $12.369 billion to $16.644 billion, marking a 35% increase, while diluted earnings per share (EPS) rose from $4.71 to $6.43, a 37% growth [3] - Operating profit reached $17.555 billion, up 27% year-over-year, with operating profit margin increasing from 38% to 41% [3] User Engagement and Advertising - The average daily active users (DAU) across Meta's family of apps reached 3.43 billion, a 6% year-over-year increase [3] - Ad impressions grew by 5% year-over-year, and the average price per ad increased by 10%, contributing to advertising revenue of $41.392 billion, which constitutes the majority of total revenue [3] Cash Flow and Future Projections - Meta's operating cash flow was $24.026 billion, with free cash flow at $10.334 billion, and total cash and cash equivalents amounting to $70.23 billion [4] - For Q2 of fiscal year 2025, Meta expects revenue to be between $42.5 billion and $45.5 billion, with total annual expenses projected between $113 billion and $118 billion [4] - Capital expenditures are anticipated to rise to between $64 billion and $72 billion, primarily to support artificial intelligence and data center development [4]

Core Viewpoint - Meta's Reality Labs is not a liability but rather a significant asset that enhances its attractiveness among the Magnificent Seven (Mag7) companies, supported by an appealing valuation, making it a buy opportunity [1][14]. Group 1: Financial Performance and Market Position - Meta's Family of Apps generates substantial cash flow, allowing investors to overlook the losses from Reality Labs, which has seen operating losses increase since its rebranding in 2021 [2][3]. - By the end of 2025, Meta's investment in Reality Labs is projected to approach $100 billion, with a focus on practical applications of AR, VR, and MR technologies [3][6]. - The revenue forecast for Meta shows a growth trajectory from $116.6 billion in 2022 to an estimated $164.5 billion in 2024, with adjusted free cash flow (FCF) margins expected to stabilize around 42% [9][10]. Group 2: Market Growth and Potential - The AR/VR/MR market is anticipated to reach a total value of $1 trillion by 2035, with applications across various sectors including gaming, healthcare, and social media [6][14]. - Meta's competitive position in the AR/VR/MR space is strong, with significant capital expenditures and a lack of successful competition from other major players like Apple and Google [6][12]. Group 3: Valuation and Future Projections - Conservative estimates suggest that Reality Labs could achieve a free cash flow margin of 25% with a market share of 20%, leading to a potential equity value of $541.09 per share based on discounted cash flow models [8][12]. - The optimistic scenario projects an equity value of $895.01 per share, indicating that Meta's current valuation does not fully reflect its potential in the AR/VR/MR market [13][14]. Group 4: Strategic Insights - Meta's integration of AI capabilities into its AR products is expected to enhance user experience and drive adoption, positioning the company favorably for future growth [3][4]. - The company is likely to see Reality Labs transition from a perceived burden to a valuable asset as it begins to deliver recognizable use cases and profitability [7][14].

Core Insights - The market has shown skepticism towards Meta's Reality Labs and Zuckerberg's vision of the metaverse, but the company's core business, Family of Apps, continues to generate significant cash flow, allowing investors to overlook the challenges faced by Reality Labs [1]. Group 1 - Meta's Reality Labs has not gained favor in the market, reflecting a lack of confidence in the metaverse vision [1]. - The Family of Apps segment remains a strong cash-generating entity, which is crucial for the company's overall financial health [1].