Meta Q3 results preview: can AI spending deliver advertising growth?

Meta Q3 results preview: can AI spending deliver advertising growth?

Meta Platforms reports its third-quarter results on Wednesday 21 October, with investors looking for evidence that its huge investment in artificial intelligence is strengthening its advertising business rather than simply driving up costs.

The Facebook and Instagram owner delivered 28% revenue growth in Q2, reaching $60.8 billion, but operating income fell 8% and net income declined 14% as expenses surged. The shares came under pressure following the results, highlighting concerns about the cost of Meta’s AI ambitions.

The central question for Q3 is whether AI-driven improvements to advertising can generate enough additional revenue and profit to justify the company’s escalating infrastructure spending.

According to LSEG Data & Analytics, analysts expect Q3 advertising revenue to rise by 24% to $62,24 billion, revenue to increase by 23% to $63.30 billion but the company’s pre-tax profit to decline by close to 16% to $18.22 billion when compared to a year ago.

Those looking to trade around the results can do so through spread betting or CFD trading, while longer-term investors can access Meta shares through IG Invest or our share dealing service.

Advertising remains the financial engine

Meta’s core advertising business remains its biggest growth driver. In Q2, advertising impressions across its Family of Apps increased 14% year on year, while the average price per advertisement rose 12%. Together, these gains helped drive the 28% increase in group revenue.

For Q3, management has guided for revenue of between $61 billion and $64 billion. At the midpoint, this would represent growth of around 26% year on year, although currency movements and advertising demand will influence the final result.

Investors will want to see whether Meta can meet or exceed that forecast. Its platforms reach billions of people through Facebook, Instagram, WhatsApp and Messenger, giving advertisers access to a vast global audience.

Meta reported 3.60 billion average daily active people across its family of applications in June, up 3% year on year. Its challenge is to turn that reach into higher advertising spending through more effective targeting, better measurement and improved campaign performance.

AI must deliver tangible returns

Artificial intelligence is central to Meta’s advertising strategy. Improvements to recommendation systems, ad targeting and automated campaign tools are designed to make advertisements more relevant and effective.

If those tools improve conversion rates, advertisers may be willing to spend more, creating a direct route from AI investment to higher revenue.

Investors will be looking for continued growth in advertising impressions and prices, alongside management’s assessment of how AI is improving campaign performance.

Meta is also developing AI assistants and more advanced models, which could create new products and revenue streams over time. However, advertising remains the clearest route through which its AI investment can generate financial returns in the near term.

For those tracking the broader technology sector and wanting to understand how AI investment is reshaping share price dynamics across major companies, our trading platform gives you access to Meta and thousands of other global markets.

The cost of the AI arms race

The biggest concern is the scale of Meta’s spending.

The company expects 2026 capital expenditure, including principal payments on finance leases, of between $130 billion and $145 billion, reflecting investment in data centres, servers and other infrastructure. Full-year expenses are forecast at $165 billion to $169 billion.

In Q2, capital expenditure reached $31.08 billion. Operating cash flow was $31.86 billion, leaving free cash flow of just $784 million, compared with $8.55 billion a year earlier.

The figures underline the financial trade-off facing Meta. Its advertising business is generating strong revenue growth, but infrastructure spending is consuming much of the cash that could otherwise be returned to shareholders or invested elsewhere.

Management continues to expect 2026 operating income to exceed 2025’s level. The Q3 results should help investors assess whether that target remains achievable as spending accelerates.

Legal costs add uncertainty

Meta also faces significant legal and regulatory risks.

The company recognised $2.4 billion in charges related to legal proceedings in Q2, alongside $1.18 billion in severance expenses associated with workforce reductions. These costs contributed to the increase in expenses and decline in net income.

Investors will want to distinguish exceptional charges from recurring operating costs, while remaining alert to further litigation expenses or regulatory developments. Scrutiny of social media platforms and their impact on younger users remains a material risk to future earnings.

What to watch in the results

Investors should focus on five areas:

• Revenue: whether Meta meets or exceeds its $61 billion–$64 billion Q3 forecast
• Advertising: whether growth in impressions and average ad prices remains strong
• Operating profit: whether revenue gains can offset rising infrastructure costs
• Capital expenditure: whether the company maintains its $130 billion–$145 billion full-year range or signals further increases
• Free cash flow: whether cash generation improves after the exceptionally low Q2 figure

Management’s outlook for Q4 will also be important. Strong seasonal advertising demand could support further growth, but investors will want to know how much additional revenue is likely to translate into profit.

Technical analysis and analyst ratings

The Meta share price – up around 15% year-to-date – is rapidly advancing towards its $780.96 September peak, a rise above which would open the way for its August 2025 record high at $796.14 to be reached.

Meta weekly candlestick chart

The Meta share price has risen by over 46% from its $518.44 late July low and will remain in a medium-term uptrend while the early October low at $710.40 underpins.

Meta daily candlestick chart

Were the early October low at $710.40 to give way, the 9 February-to-July highs at $691.40-to-$683.26 would likely be revisited. This area represents a key support zone, though.

TipRanks has a Smart Score of ’10 Outperform’ for Meta, accompanied by a ‘strong buy’ recommendation.

According to LSEG Data & Analytics, the majority of 63 analysts rate Meta as a ‘buy’ but 18 as a ‘strong buy’, 6 as a ‘hold’ and 1 as a ‘sell’. Their mean long-term price target sits around $800, about 4% above current levels (as of 14 October 2026).

The bottom line

Meta enters its Q3 results with a powerful advertising business, a global audience of billions and strong revenue momentum. However, its AI ambitions are creating a financial trade-off: spending is rising dramatically while operating income and free cash flow have come under pressure.

A revenue beat, resilient profitability and evidence that AI is making advertising more effective could restore confidence. If spending continues to accelerate without a corresponding improvement in earnings or cash generation, investors may become more sceptical about the returns on Meta’s investment.

The key question is no longer whether Meta can afford to invest in AI. It is whether those investments can deliver enough additional growth to justify their enormous cost.

How to invest in Meta shares

1. Do your research on Meta, the Q3 results on 21 October and the key metrics to watch across advertising, costs and free cash flow
2. Download IG Invest or open a share dealing account with us
3. Search for Meta Platforms (META) in our platform or app
4. Choose the number of shares or value of money you’d like to invest
5. Place your trade