Table of Contents
1. Meta (META) – Earnings Review
a. Key Points
20%+ multi-year revenue compounding at massive scale.
AI again drove its content recommendation and ad matching improvements.
They will spend aggressively in 2026 and margins will fall Y/Y.
2026 revenue guidance represents its fastest rate of growth since the pandemic.
b. Demand
Beat revenue estimates by 2.6% & beat guidance by 4.2%.
Family of Apps (FOA) revenue beat estimates by 2.6%.
Facebook Reality Labs (FRL) slightly missed estimates.
There was a 1-point currency tailwind, which was as expected.
Beat 3.56B daily active user (DAU) estimates by 20M.
Meta has more than 2B DAUs across each of Facebook and WhatsApp. It’s nearing that mark with Instagram as well.
Beat 12% Y/Y ad impression growth estimates with 18% Y/Y growth. Impression growth was driven mostly by engagement gains, rather than showing users more ads.
Missed 9% Y/Y ad pricing growth estimates with 6% Y/Y growth.
Pricing growth was driven by better ad performance.
Other revenue beat $719M estimates by 11%. I know this bucket is puny compared to the mighty Family of Apps (FOA) business, but it is quickly emerging as a material growth accelerant. The bucket includes paid messaging ads on WhatsApp, which is why growth is so rapid and why I’m so interested in tracking it. WhatsApp is still so early in its monetization journey, resembling an Instagram of 10 years ago in terms of headway left to enjoy and boasting a larger user base. Between this, its smartglasses and its apps business that’s still somehow rapidly expanding, Meta is sharply outgrowing every single other Mag 7 company. It's even outgrowing CrowdStrike as of this quarter.
c. Profits & Margins
Beat EBIT estimates by 3.5%.
Beat $8.19 EPS estimates by $0.69. The beat was aided a bit by a 10% tax rate vs. its 13.5% tax rate guidance.
EPS rose by 8% Y/Y.
I excluded the large one-off tax charge from last quarter to avoid non-apples-to-apples Q/Q comps.
Beat $12B FCF by $2B despite CapEx meeting $22B estimates.
OpEx rose by a whopping 40% Y/Y driven by higher infrastructure costs (including more depreciation from all the CapEx over the last few years). Higher employee compensation from its AI hiring spree, 6% overall headcount growth and legal fees all contributed as well
d. Balance Sheet
$81B in cash & equivalents.
$27.5B in investments.
$58.7B in long-term debt.
-1.4% Y/Y share count growth.
e. Guidance & Valuation
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