I am bullish on Meta’s Q3 2025 earnings. My estimates (see Google Sheet) are based on continued gains from Meta’s AI-driven ad models, insights from the recent Tinuiti report, upgraded ad spend forecasts, positive Q3 results from major media and advertising agencies, and Meta’s consistent guidance beats over the past six quarters.
Here is a description of by bullish and bearish sentiments:
Bullish sentiments
- Continued gains from AI ad models: Meta’s AI ad models such as Andromeda and GEM continue to get better in retrieving and ranking ads and targeting users with relevant ads. CEO Mark Zuckerberg said (Notion) Q2 2025 revenue outperformance was largely due to these AI models “unlocking greater efficiency and gains”. Meta is still launching these models across its platforms (Notion), hence further tailwind is expected. Also, Meta expects Gen AI to boost its recommendation landscape further.
- Positive Tinuiti report: Tinuiti’s Q3 2025 Digital Advertising Benchmark report report shows that ad spend on Meta Platforms grew 14% y/y. Historically, Tinuiti has been a reliable indicator of Meta’s ad revenue. Based on the report, Meta’s Q3 revenue could grow by at least 23%.
- Upgraded ad spend projections by S&P Global, WARC and MoffettNathanson: Recently, S&P Global, WARC and MoffettNathanson raised their ad spend projections for 2025, signaling that sentiment has improved after a shaky start to the year. S&P Global raised 2025 growth estimates for US digital advertising spend to 9.5% from 6.7%. WARC raised 2025 global ad spend forecast by 1.2% to 7.4% while MoffettNathanson raised 2025 growth estimates for US advertising spend by 0.3% to 6.3%.
- Analysts ad checks were positive for Meta in Q3: Several research firms such TD Cowen, Piper Sandler, Guggenheim, and Deutsche Bank said (Notion) their Q3 2025 ad checks were positive for Meta Platforms.
- Omnicom and Publicis (media and advertising agencies) revenue were in line with estimates: Omnicom Group and Publicis reported (Notion) Q3 2025 revenue growth rates that were in line with estimates. The two firms said they have not seen budget cuts and Publicis even raised its 2025 revenue guidance. Advertising spend typically flows first through media and advertising agencies. In a macroeconomic slowdown, advertisers often bypass agencies. Therefore, continued strength in agency spend suggests positive momentum for Meta Platforms.
- Improving engagement: Third-party estimates (Notion) indicate that engagement in Meta Platforms, particularly in Instagram continues to improve. Citizens Financials said Instagram’s global time spent rose 18.5% y/y in September, the fastest growth rate since March 2024 and representing a 20 basis points increase from August. Similarly, Facebook saw a 5.6% increase in time spent by U.S. users, increasing 380 basis points month-over-month.
- Guidance beat in the last six quarters: Meta Platforms has beaten management’s mid-point revenue guidance by an average of 4% in the most recent six quarters. It has also beaten management’s upper-point revenue guidance by an average of 2% in the most recent three quarters.
- Improving sentiment on DMA: Recent reports indicate that Meta and the EU Commission are close to reaching a workable solution regarding the “pay or consent” model. I had estimated that the DMA could lead to a $3.8 billion revenue headwind in 2025 and Meta’s management also expected significant headwind as early as Q3 2025. Based on commentaries, it’s unlikely that Meta made any drastic changes to its ad targeting model in the EU in Q3.
- FX tailwind: Meta’s Q3 2025 revenue will likely benefit from the weaker U.S. dollar against major global currencies. Management guides FX tailwind of 1% in Q3, in line with my rough estimate.
- New AI hires: Meta continues to recruit top AI engineers and researchers from OpenAI, Google, and Apple. I expect these new AI hires to address Meta’s underperformance in large language models (LLMs) in the medium-term.
Bearish sentiments
- AI execution risks: Managing newly recruited top AI talent could prove challenging, as many were former team leaders in their previous roles. Their high compensation packages and Meta’s heavy reliance on them may also dampen morale among long-tenured employees. Meta’s recent decision to cut 600 out of 3,400 AI roles—its fourth AI team restructuring—underscores ongoing organizational volatility and raises execution risk.
- Sentiment headwind from Sora: Sentiment on Meta Platforms shares has been under pressure recently following the launch of OpenAI’s TikTok-like Sora. Some investors are concerned that Sora may steal user engagement from Social Media platforms such as Meta Platforms. I don’t expect Sora to be a major risk given Meta’s strong network effects. However, Instagram’s user engagement may come under pressure in the coming months as users test Sora (Notion).
- Valuation risk: Trading at a trailing twelve-month (TTM) P/E of around 26.6, Meta’s share price could face a significant pullback if the company slightly misses expectations or if management delivers negative commentary on AI.
- Rising capex: Based on recent management commentary, it’s likely that Meta will increase capex guidance for 2025 further. Growing capex and ongoing underperformance of its Gen AI models may limit further upside for Meta shares. I expect Meta to increase its capex guidance for 2025 to a range of $68-$72 billion, up from $66-72 billion (Depreciation Model-Google Sheet).
- Decelerating CPM: Meta’s focus on reels is creating pressure on CPM since video carries lower monetization compared to Stories and Feed. Hence, Meta’s ad revenue growth in the near-term will likely be driven by market share gain (due to rising impression) and not CPM growth. However, I expect CPM to stabilize after a while and to benefit from growing efficiency gains from AI ad models.
Here are management’s and analysts’ expectations for Q3 2025;
Management Guidance for Q3 (Revenue): $47.5-$50.5 billion (+17.0% to +24.4%)
Analysts’ Estimate for Q3 (Revenue): $49.57 billion (+22.1%)
Analysts’ Estimate for Q3 (EPS): $6.72 (+11.4%)
Analysts’ Estimate for Q4 (Revenue): $57.2 billion (+18.2%)
Analysts’ Estimate for Q4 (EPS): $8.11 (+1.2%)
Recommendation
Overall, given the resilience of the advertising market, Meta’s continued market share gains, ongoing improvements in its AI-driven ad models, improving regulatory sentiment in the EU, and rising user engagement, I reiterate a Hold rating on Meta shares. However, should there be any pullback driven by negative sentiment surrounding Sora or AI developments, I would view it as a buying opportunity.
See also: Meta Platforms Investment Thesis (Notion Draft) | Q3 2025 Meta Platforms Earnings (Notion)