Meta's Q3 earnings report faces a "big test" on Wednesday. Will investors continue to pay big bucks for AI?
Meta Platforms will release its third-quarter earnings report on Wednesday, with progress in its artificial intelligence business becoming the focus. Investors are concerned whether its high spending will yield returns. Bank of America analysts expect Meta's revenue to exceed $50 billion, surpassing Wall Street's expectations. Although the expected earnings per share is $6.71, it has declined compared to the previous quarter. Meta recently laid off 600 employees to control costs and reached a $27 billion private financing agreement with Blue Owl Capital
According to the Zhitong Finance APP, Meta Platforms (META.US) will release its third-quarter financial report after the market closes on Wednesday, with the progress of its artificial intelligence business becoming the focus of attention. Investors are likely to closely monitor signals regarding whether its investments are yielding returns. The social media giant has set ambitious AI goals, but can it convince investors to continue supporting its high expenditures?
To support data center construction and pay high salaries to recruited AI talent, Meta has raised its capital expenditure expectations twice this year. Now, it may need to deliver more impressive results to leave a strong impression on the market.
Bank of America analysts stated last week that they expect Meta's revenue to exceed $50 billion, driven by growth in advertising revenue, slightly above Wall Street's consensus expectation of $49.54 billion. If achieved, this would set a new revenue record.
Meanwhile, the average expectation for Meta's earnings per share is $6.71, which, although still showing year-on-year growth, represents a decline compared to the previous quarter. Recent reports about Meta's layoffs and hiring freeze may suggest that it is experiencing some pressure in controlling costs.
This month, Meta announced it would cut about 600 positions in its "Superintelligence Labs," a small fraction of the thousands of employees in that department, aiming to make the company's AI organization "more agile and responsive."
The layoffs will affect the Facebook Artificial Intelligence Research (FAIR) department, as well as related teams focused on product AI and AI infrastructure. Meta's Chief AI Officer, Alexandr Wang, stated in an internal memo that reducing team size would accelerate decision-making efficiency and enhance the breadth of responsibilities, influence, and output weight of team members.
This month, Meta also announced a $27 billion private financing agreement with Blue Owl Capital (OWL.US), the largest private capital collaboration in Meta's history, with funds earmarked for the company's largest data center project ever.
According to insiders, the financing is not directly borrowed by Meta but is raised by a special purpose vehicle (SPV) designed for this purpose. Accordingly, Meta will serve as the developer, operator, and tenant of the project, which is expected to be completed by 2029.
So far this year, Meta has outperformed many other large tech peers in persuading investors to support its AI goals. The financial report to be released this Thursday may become the next significant test to prove that its revenue growth is sufficient to support its current expenditure scale.
On the eve of the financial report release, Wall Street analysts generally hold an optimistic view of the social media giant's stock. Among 21 analysts surveyed, except for one who gave a "neutral" rating, the rest provided "buy" ratings. They set an average target price close to $873, indicating about an 18% upside based on last Friday's closing price Since 2025, Meta's stock price has risen by more than a quarter, making it one of the better-performing members of the "Magnificent 7" in U.S. stocks, second only to NVIDIA (NVDA.US) and Google's parent company Alphabet (GOOGL.US)
