Meta Platforms shares dropped 8.02% to $641.55 by the time of publication on Thursday, despite strong third-quarter results. Analysts revised Meta's price targets following continued strength in the core advertising business.
Wedbush analyst Arounian said third-quarter results and fourth-quarter guidance generally exceeded expectations. However, Arounian said management offered no further clarity on 2027 costs and capital expenditure while signaling continued aggressive investment. Arounian said frequent AI product launches, particularly ambitious plans for Muse, would likely require substantially more computing capacity in 2027. Arounian increased the 2027 capital expenditure estimate from $210 billion to $249 billion.
TD Cowen analyst Blackledge said revenue rose 26.1% from a year earlier and exceeded consensus by 2%. Blackledge said advertising revenue surpassed expectations because of strength across every region. Blackledge said time spent per user on Instagram and Facebook Reels increased at double-digit rates during the quarter. Blackledge said management's fourth-quarter revenue forecast of $73 billion to $76 billion exceeded consensus by 3%. Blackledge expects large language models that improve understanding of users and content to keep strengthening engagement and advertising performance.
Scotiabank analyst Schindler said Muse's profitability depends on sharply lower serving costs and a new transaction-based revenue source requiring changes in consumer and business behavior. Schindler said Meta plans investments totaling hundreds of billions of dollars, starting as early as fall of 2026. Schindler said management indicated that Meta may need to raise equity to execute the company's business plans.
Rosenblatt Securities analyst Crockett said the results showed that Meta's AI-supported advertising growth remained intact. Crockett said revenue increased 26% from a year earlier to $64.6 billion, slowing slightly from the second quarter's 28% growth. Crockett said fourth-quarter guidance implied nearly 27% revenue growth despite an additional currency headwind, with AI credited for improving engagement and advertisers' returns.
KeyBanc Capital Markets analyst Patterson said reported earnings of $3.83 per share fell short of the $5.29 consensus estimate. Patterson said earnings included $9.9 billion in legal expenses associated with Meta's mental health settlement, without which earnings would have been $7.40 per share. Patterson said AI initiatives continued to support advertising revenue. Patterson expects AI product momentum to sustain revenue growth in the low-to-mid-20% range through 2028, offsetting some additional capital expenditure.
Cantor Fitzgerald analyst Mathivanan said strong video growth drove engagement on Facebook and Instagram to record levels. Mathivanan said management expressed confidence in strong revenue growth throughout the year. Mathivanan said Muse added more than 10 million new accounts. Mathivanan said Muse's daily retention rates were close to 25% and described the product as having considerable momentum.
Guggenheim Securities analyst Morris said third-quarter revenue and operating profit exceeded market expectations. Morris described fourth-quarter guidance and initial commentary on 2027 as incrementally positive. Morris said more than 25% of Muse users made an average purchase exceeding $200. Morris said management was seeking to monetize Muse earlier than Meta usually monetizes products. Morris said Muse revenue per user was expected to surpass the existing Family of Apps level of several hundred dollars annually per U.S. user.
Needham analyst Laura Martin advised investors to remain on the sidelines. Martin cited Meta's stated requirement for hundreds of billions of dollars in AI investment. Martin said a nonvoting stock split implied that Meta could raise around $100 billion in equity during the first half of 2027. Martin said Muse remained at an early stage, while Apple, Alphabet, Amazon.com, Anthropic and OpenAI would each offer agents, some with greater consumer trust.
Benchmark analyst Zgutowicz said Meta's 79.3% gross margin fell about 80 basis points short of consensus despite revenue exceeding expectations. Zgutowicz said cost of goods sold increased by $2.04 billion from the previous quarter. Zgutowicz said total depreciation and amortization increased by only $80 million. Zgutowicz argued that depreciation did not explain the gross-margin shortfall and that cash costs accounted for at least $1.24 billion of the increase.
Meta Platforms Q3 Ad Revenue Surpasses Expectations, Analysts Adjust Price Targets
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Summary
Meta Platforms (NASDAQ:META) posted better-than-expected Q3 ad revenue, even as its crypto price-sensitive stock fell 8.02% to $641.55. Analysts from Wedbush and TD Cowen raised price targets and updated CAPEX forecasts, pointing to strong ad performance and AI spending. The firm also guided for Q4 revenue of $73–76 billion, beating estimates. Price analysis from FLASH AI shows continued confidence in Meta’s ad-driven growth strategy.
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