Hey folks,

Meta Platforms has been on our radar for several years.

We first highlighted it as a core holding back in 2022. That call centered on its unmatched scale in digital advertising paired with early bets on AI and the metaverse. Those positions have paid off handsomely since then.

The Q3 2025 earnings report brought a sharp reminder of the stock's volatility. Shares dropped 11% in the days after the release. Investors fixated on two issues. A one-time $15.93 billion tax charge slashed GAAP net income to $2.71 billion and EPS to $1.05. That missed consensus by a wide margin. Then came the capex warning. Management raised full-year spending to $70-72 billion. They flagged even larger outlays in 2026 to fuel AI infrastructure. The market recoiled at the uncertainty around returns on those dollars.

The underlying business delivered another quarter of robust growth. Revenue hit $51.24 billion, up 26% year over year. Ad revenue led the way at $50.08 billion, also up 26%. Family daily active people reached 3.54 billion, an 8% increase. Adjusted for the tax hit, net income came in at $18.64 billion. EPS adjusted to $7.25. Those figures beat expectations and underscore the core engine's strength.

The Fundamental Growth Engine

Meta's investment case boils down to a simple formula. It grows users. It grows revenue per user. Both happen in tandem.

This dual dynamic sets it apart from peers chasing one or the other. The company adds hundreds of millions to its user base each year. At the same time, it refines ad targeting and pricing to lift monetization.

Q3 numbers validated this setup once more. Ad impressions rose 14%. Average price per ad climbed 10%. Operating margins held at 40%, down just three points from last year despite heavy AI investments. Free cash flow generated $10.62 billion for the quarter. Management returned $4.49 billion to shareholders through buybacks and dividends.

So what's the bigger picture on this?

Our models point to Meta reaching $1,200 per share by 2030. That assumes steady execution on the core social business plus gradual ramps in AI-driven revenue.

We project:

• Ad revenue to hit $250 billion annually.

• Reality Labs to contribute $25 billion as metaverse hardware and software scale.

• AI services and enterprise tools to add $15 billion.

• Emerging bets like WhatsApp payments and e-commerce to reach $10 billion.

• Other streams, including content licensing, to fill out $5 billion.

Macroeconomic Tailwinds: The Ad Market Recovery

Meta thrives when consumer spending flows into digital ads. Broader economic conditions now align to support that flow.

The Federal Reserve's rate cuts since mid-2024 have eased pressure on households. Lower borrowing costs spur discretionary purchases. Brands respond by boosting ad budgets.

Key Benefits from the Rate Cycle:

• Higher consumer confidence drives e-commerce and travel ads, Meta's sweet spots.

• Eased credit conditions lift small business ad spend on Facebook and Instagram.

• Normalized yield curves improve Meta's own financing for capex without squeezing margins.

• Reduced recession fears encourage long-term brand campaigns over short-term cuts.

These factors should amplify Q4 guidance of $56-59 billion in revenue. They provide a bridge while AI initiatives mature.

The AI and Platform Monetization Opportunity

Meta's edge lies in its ecosystem. Billions of users generate vast data. AI turns that data into smarter ads, content, and experiences.

The post-earnings dip overlooks this flywheel. Investors see capex as a cost. We see it as fuel for defensibility.

The AI Growth Flywheel:

• Better ad algorithms cut waste and raise click-through rates for advertisers.

• User retention climbs as personalized feeds and Reels keep people scrolling longer.

• New revenue layers emerge, like AI-powered business tools for Instagram Shops.

• Cross-platform synergies grow, with WhatsApp feeding data back to core apps.

• Barriers to entry rise, as rivals lag in compute scale and talent.

Membership equivalents keep expanding at 8% annually. Each addition opens doors to multiple products. Lifetime value per user compounds as engagement deepens.

Meta stands as a high-conviction pick built on proven scale rather than hype. The earnings reaction created a 10% discount to our $850 fair value estimate. Pair that with ad tailwinds, AI runway, and a fortress balance sheet holding $44.45 billion in cash. You get a setup primed for 40% upside over the next two years.

Anyways...

That's all for now!

Until Next Time,

- Equity Insider


Equity Insider is a publication of Market Vision LLC (a Texas LLC). All content is for general educational/informational purposes only and is not personalized investment advice or a solicitation. CRITICALLY, Market Vision LLC is compensated to publish favorable information about featured instruments, creating a material conflict of interest (SEC 17(b)). Users must ALWAYS ASSUME a conflict exists and that the Publisher and its affiliates may hold and trade positions in the featured instruments at any time. All trading involves substantial risk and the risk of total capital loss. You are solely responsible for your own due diligence and investment decisions. By accessing the content, you agree to be bound by the full terms, including binding arbitration in Texas and a waiver of your right to a jury or class action.