Meta grew revenue 26% in the latest quarter and has forecast faster growth for the final three months of 2026, yet its shares have been mostly flat in pre-trading, swinging between -1% and 0.5% at the time of writing.
Investors are seemingly looking past the positive revenue figures to two questions: how much the company will spend on AI next year and whether the other big technology groups reporting next week can show that spending is paying off.
Meta expects to spend heavily again in 2027 if its Muse AI app (the AI agents app that was launched in the US and Canada and grew to 2.5 million daily users within weeks) keeps gaining momentum.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Meta delivered another quarter that makes it hard to argue against the strength of the core business... [Muse] early adopters are some of Meta’s most valuable users, so keeping up the momentum is key”.
The big question remains cost. He added: “We continue to see Meta as one of the best-placed names to capitalise on consumer and enterprise AI. But with next year’s investment bill still unknown, a possible equity raise and an earnings multiple that has now re-rated, the near-term balance of risk and reward looks more even”.
Marcus Weyerer, director of ETF investment strategy at Franklin Templeton, said the quarter was a good one as revenue came in 2% above analyst estimates. Earnings per share (profit divided by the number of shares) fell short due to a one-off $10bn legal charge, which he expected the market to look through. The problem, however, is how much was already priced in.
“Normally, analyst expectations go down before the actual reporting. This time they have gone up, because we’ve seen so much good news in the meantime. Q2 was an extraordinarily strong quarter. Even Q1 was very strong. But in both cases, the analyst expectations were relatively muted. This quarter it will be more difficult to see those consistent high beats just because the expectations have caught up,” he said.
However, the market should “be in good shape” if concerns around AI spending and its monetisation can be addressed, and with these results, Meta has just done that, he said.
“Monetisation is the key,” he added, although noted that he is already starting to see progress made in this area.
Monetisation has already come through in previous results from other companies, such as Microsoft and Amazon reporting “huge cloud growth” last quarter. Today, Muse is free (with limits), but there are different monetisation models proposed for the future, including taking a cut from the purchases done by its AI agents.
“I cannot predict the future, but comments from chief executives and finance chiefs are consistent across the sector. It would be very unusual if there are negative surprises here,” Weyerer said.
The remaining hyperscalers and large tech companies, including Microsoft, Alphabet, Apple and Amazon, are reporting next week, with Microsoft the main headline grabber, according to Weyerer.
“It’s the only one of the hyperscalers that still has, despite that spending, positive free cashflow. The others have gone negative,” he said. “If Microsoft said, ‘We can’t spend enough anymore,’ then that would be a problem.”
Further out, he named Oracle as one to pay attention to as it is becoming “almost a neo cloud”. Last week CoreWeave, a company that rents out AI computing power, fell on concerns about its high leverage. Oracle has high leverage and a very negative cashflow too.
“So for them, it’s even more important to show monetisation of that cloud business,” said Weyerer. However, he noted that any issues would largely be viewed as company-specific.