Meta Platforms Inc. delivered robust second-quarter results late Wednesday, sending its stock up nearly 12% in early Thursday premarket trading.
The Facebook and Instagram parent beat Wall Street estimates on both revenue and profit, underlining the strength of its core advertising business and growing investor confidence in its artificial intelligence strategy.
Revenue rose 22% year-on-year to $47.5 billion for the April-June quarter, while net income reached $18.3 billion, exceeding analyst forecasts.
It was one of Meta’s strongest quarters since its pivot to AI began in earnest last year.
The stock, up 16% year-to-date, is now approaching a $2 trillion valuation — a milestone it has never before reached.
The S&P 500, by contrast, has gained 8.42% in the same period.
AI investments show results in ad growth and engagement
Meta’s second-quarter results suggest its heavy investments in artificial intelligence are already yielding benefits, particularly in advertising — the company’s primary source of revenue.
“The investments it’s making in AI are already paying off in its ads business,” said Jasmine Enberg, principal analyst at research firm eMarketer.
Ad impressions were up 11% compared to the year-ago quarter, while the average price per ad increased 9%.
Together, they contributed to the 22% revenue growth from the advertising segment, reaffirming Meta’s dominance in digital marketing.
Meta also reported that users are spending more time on its platforms.
Video viewing time on Facebook and Instagram grew over 20% in the quarter, thanks to improvements in the company’s AI-driven content recommendation systems.
CFO Susan Li said Meta will continue optimizing these models throughout the year to make recommendations more personalized.
Meta tames spending outlook, reassures investors
In a notable shift, Meta did not raise its top-end capital expenditure guidance for the first time this year, helping calm market nerves around CEO Mark Zuckerberg’s ambitious AI spending spree.
Investors viewed this as a signal that Meta may begin reaping returns from its earlier outlays without requiring an immediate hike in spending.
Still, the company remains one of the most aggressive spenders in AI.
Meta has earmarked up to $72 billion in capital expenditures for 2025, primarily focused on AI infrastructure and talent acquisition.
Analysts expect this figure to climb further in the next quarter.
Zuckerberg’s push includes a $14 billion investment for a 49% stake in Scale AI, a data-labeling startup, and the recruitment of its CEO, Alexandr Wang.
The company has also been actively poaching researchers from competitors, including OpenAI.
Reports suggest Meta offered some individuals compensation packages in the hundreds of millions — and in one case, a $1 billion deal.
Reality Labs remains a drag, but not a deterrent
While the core business thrives, Meta’s Reality Labs division remains a financial sore point.
The unit, tasked with building the company’s metaverse products, posted a loss of $4.5 billion for the quarter.
This continues a trend of heavy losses, but analysts say the segment remains immaterial compared to Meta’s broader advertising operations.
Meta management has warned that expense growth will accelerate next year in step with rising capital investments.
This could potentially pressure margins if revenue growth does not keep pace. However, the market currently views Meta’s spending as a justifiable gamble on long-term growth.
Analysts back Meta’s strategy amid broader tech optimism
Meta is the third major tech company to report strong quarterly results this earnings season, following Alphabet and Microsoft.
Alphabet reported record sales and raised capital expenditure guidance by 13%, while Microsoft exceeded expectations, fuelled by 39% growth in its cloud division.
On Wall Street, sentiment toward Meta remains bullish.
Jefferies, TD Cowen, and Canaccord Genuity all reiterated buy ratings with price targets ranging between $875 and $950, representing significant upsides to its current share price of $695.21.
Jefferies said Meta is “well-positioned to capitalize on improving advertiser demand & AI momentum going forward”.
Pivotal Research called the company’s aggressive AI investments “reasonable,” given the size of its revenue gains. It kept a PT of $930 on the stock.
Scotiabank, more cautious, maintained a sector perform rating with a $685 target, warning that Meta must continue ramping up expenses to maintain momentum.
According to Zacks, Meta’s combination of earnings growth, revenue strength, and liquidity puts it among the top choices for institutional investors, calling it a “hedge fund hotel.”
The research firm also emphasized that ad revenue is the most critical metric for evaluating the company’s AI strategy.
“Overall, the core advertising engine is firing on all cylinders, with Meta generating 22% year-over-year growth in the segment,” it said, adding that a reasonable target into 2026 is between $900 and $1,000 per share.
With both impressions and pricing up in Q2, the data suggest AI is having a clear and measurable impact.
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