Meta Earnings Updates: Q2 Results Beat Estimates, Stock Surges 12%

Meta’s stock is trading up 12% to $778 after hours, a record level for the company.

Zuckerberg talks about the smaller size of Meta’s new Superintelligence Labs team.

It’s an echo of what he’s said about building lean teams focused on efficiency. He praises “the ability for small talent, dense teams to be the optimal configuration for driving frontier research.”

It breaks from how the company operates in other divisions, he notes.

“If you look at like what we do in Instagram or Facebook or our ad system, we can very productively have many hundreds or 1000s of people basically working on improving those systems,” he says. “But I think for this, for the leading research on superintelligence, you really want the smallest group that can hold the whole thing in their head.”

Zuckerberg says he doesn’t believe his thinking on open-source has particularly changed.

Zuckerberg expects to continue to ship open-source products, though there are some challenging considerations with open-sourcing at this scale, he says.

“We’re getting models that are so big that they’re just not practical for a lot of other people to use. So we kind of wrestle with whether it’s productive or helpful to share that, or if that’s really just primarily helping competitors or something like that,” he says.

The bottom line, Zuckerberg says, is he expects to continue to ship open-source products, but not every product will be — which he says is a continuation of Meta’s approach to open-source.

“There’s just a very high chance it seems like the world is going to look pretty different in a few years from now,” Zuckerberg notes. “The more aggressive assumptions, or the fastest assumptions, have been the ones that have most accurately predicted what would happen.”

The stock price hits $771 as questions with Wall Street analysts begin.

Li says the company continues to focus on head count growth in its “highest priority areas.”

“We’ve had a particular emphasis on recruiting leading talent within the industry as we build out Meta Superintelligence Labs to accelerate our AI model development and product initiatives,” she says.

Turning to AI-related infrastructure costs, Meta also expects to “ramp our investments significantly in 2026” for infrastructure.

“Nearly 2 million advertisers are now using our video generation features, image animation, and video expansion, and we’re seeing strong results with our text generation tools as we continue to add new features,” CFO Susan Li says.

In the second quarter, the company started testing AI-powered translations to 10 different languages, she adds.

Meta says Reality Labs revenue, its segment that includes its AI hardware as well as virtual and augmented reality headsets, is up nearly 5% — thanks to sales of its AI Ray-Bans.

Zuckerberg says that he thinks AI glasses will be “the main way” that the company integrates personal superintelligence into people’s daily lives.

The Meta CEO says the company has built an “elite” team of AI researchers and engineers, highlighting the hire of Scale AI founder Alexandr Wang, who leads the new lab.

“We’re building an elite, talent-dense team,” he said. “I’ve spent a lot of time building this team this quarter.” He also referenced the hiring of ex-OpenAI researcher Shengjia Zhao, chief scientist of Meta’s Superintelligence Labs and former GitHub CEO Nat Friedman.

The company has noted in its earnings release that employee compensation for adding technical talent in “priority areas” (read AI) is its second-greatest driver of cost growth.

CEO Mark Zuckerberg is on the call, along with CFO Susan Li.

“Meta’s blowout earnings and raised guidance highlight how AI is becoming a real revenue driver, not just hype,” said Jesse Cohen, senior analyst at Investing.com. “From ad targeting to content discovery, Meta is showing how to deploy AI at scale — and Wall Street is rewarding it. The company’s continued heavy investment in AI infrastructure signals it’s playing the long game and betting big on foundational models and compute power.”

Minda Smiley, senior analyst at EMARKETER, a sister company of Business Insider, said the company’s strong quarter shows it “not only weathered but perhaps even benefitted from economic instability in recent months” and that the digital ads market more broadly “might not yet feel the pain from tariffs, though that could change.”

And while Meta continues pouring money into its AI ambitions, “Meta’s exorbitant spending on its AI visions will continue to draw questions and scrutiny from investors who are eager to see returns,” Smiley said.

The company revised its ranges on total expenses and capital expenditures it forecasts for 2025, narrowing its estimates.

Its total expense outlook, previously $113 to $118 billion, is now $114 to $118 billion for the year. (That’s growth of 20 to 24% year-over-year.)

Meta also narrowed its capex range, from $64 to $72 billion previously to $66 to $72 billion for the year. It says it also expects “another year of similarly significant capital expenditures dollar growth in 2026.”

Those AI talent wars you’ve been reading about? They’re real — and expensive — Meta says.

Not in those words, exactly. But that’s clearly what the company is getting at in today’s note to investors, where it acknowledged that all that spending is indeed going to show up on its financial statements.

“While we are still very early in planning for next year, there are a few factors we expect will provide meaningful upward pressure on our 2026 total expense growth rate,” Meta said. “The largest single driver of growth will be infrastructure costs, driven by a sharp acceleration in depreciation expense growth and higher operating costs as we continue to scale up our infrastructure fleet.”

“Aside from infrastructure, we expect the second largest driver of growth to be employee compensation as we add technical talent in priority areas,” Meta added.

That said, Meta says its overall organization got smaller in the last quarter. It currently employs 75,945 people, down about 1% from the 76,834 it reported in Q1.

—Peter Kafka

Second quarter

• Revenue $47.52 billion, +22% y/y, estimate $44.83 billion
• EPS $7.14 vs. $5.16 y/y, estimate $5.89

• Advertising rev. $46.56 billion, +21% y/y, estimate $44.07

  billion

• Family of Apps revenue $47.15 billion, +22% y/y, estimate

  $44.4 billion

• Reality Labs revenue $370 million, +4.8% y/y, estimate $386

  million

• Other revenue $583 million, +50% y/y, estimate $500.6 million

  Operating income $20.44 billion, +38% y/y, estimate $17.24

  billion

• Family of Apps operating income $24.97 billion, +29% y/y,

  estimate $22.16 billion

• Reality Labs operating loss $4.53 billion, +0.9% y/y,

  estimate loss $4.86 billion

• Operating margin 43% vs. 38% y/y, estimate 38.3%
• Ad impressions +11% vs. +10% y/y, estimate +6.91%

• Average price per ad +9% vs. +10% y/y, estimate +7.58%

  Source: Bloomberg data

Meta’s hardware sales could be key to watch in light of some new developments since the company’s last earnings call.

In June, Zuckerberg unveiled new Oakley Meta glasses, similar to Meta’s Ray-Ban smart glasses but branded as “performance AI glasses” geared toward athletes. Earlier this week, EssilorLuxottica, which makes Ray-Ban and Oakley, said revenue from sales of Meta’s Ray-Bans more than tripled year-over-year.

Wall Street was impressed with Meta’s demo of its Orion augmented reality glasses prototype in September, though the glasses aren’t expected to launch to consumers before 2027. Any update on the expected timeline for the more advanced AI smart glasses, which included integrated displays in the lenses, would be of interest to investors.

Meta stock edged 0.6% lower Wednesday afternoon as investors prepared to parse the company’s quarterly results.

Shares of the tech giant are up 19% year-to-date.

You can expect AI to be a heavy focus on this earnings call. (What else is new?) The company is allocating billions in capital expenditures toward infrastructure, talent, and other costs to support its AI ambitions.

Meta has been in an all-out talent war for the biggest names in AI, poaching some competitors from rival firms with million-dollar bonuses.

The company in June announced a new AI division called Superintelligence Labs. The company took a 49% stake in Scale AI for nearly $15 billion to make Scale founder Alexandr Wang Meta’s new chief AI officer.

— Sarah Jackson

Angelo Zino, an analyst at CFRA Research, wrote this month that investors will likely be most interested in three things heading into Meta’s earnings call:

1. The implications of the company’s recent “AI hiring spree.”
2. The health of Meta’s ad spending across its social media platforms.
3. The company’s monetization of AI and other growth initiatives.

Still, Zino said he expects Meta to meet its expected revenue targets for the second and third quarters, largely due to increased stability in the digital ad market.

CFRA reiterated its “Buy” rating on the stock and lifted its price target to $800 from $750, implying 12% upside from current levels.

Zuckerberg kicked off the company’s earnings day by sharing his vision on superintelligence, which he believes is “now in sight.” His memo Wednesday outlined his hope for a future where everyone has “a personal superintelligence that helps you achieve your goals.”

“Personal superintelligence that knows us deeply, understands our goals, and can help us achieve them will be by far the most useful,” he wrote. “Personal devices like glasses that understand our context because they can see what we see, hear what we hear, and interact with us throughout the day will become our primary computing devices.” (Of course, it’s worth noting that Meta sells various smart glasses.)

— Sarah Jackson

Meta could lift its capital expenditures even higher as it ploughs more money into AI and superintelligence projects, analysts at Citizens wrote.

“With Meta making material investments in its superintelligence team, including researchers and compute, we believe the company is going through a significant investment cycle and we expect 2026 CapEx to surprise the Street as Meta builds multiple 1GQ or greater data centers,” they said, estimating capex could come in around $91 billion next year.

Stocks typically don’t benefit when a company is going through an investment cycle, analysts said, but the situation could be different for Meta, as AI can enhance the ad experience for users.

The firm reiterated its “Market Outperform” rating and $750 price target on the stock, implying 5% upside from current levels.

Needham had a mixed view of Meta headed into its second-quarter earnings.

On the one hand, the firm’s analysts upgraded their rating for the stock from “Underperform” to “Hold,” citing two positive catalysts:

• Rising revenue. “Based on our channel checks, we expect META to over-deliver on our prior rev and margin estimates for 2Q25 and FY 25,” the analysts said, estimating that Meta would post 14% revenue growth and 6% earnings per share growth for the year.
• High productivity. Meta’s business could be more productive than other mega-cap tech firms, with the company scoring the highest on free cash flow relative to labor costs in 2024.

Still, the firm sees a few risks ahead that held it back from rating the stock a “buy.”

Those include pressure on Meta’s margins and free-cash flow, potentially higher-than-expected total labor costs due to stock-based compensation, and Meta’s use of several strategies in its business, which “wastes capital and adds risks,” analysts said.

Oppenheimer said it sees a handful of risks looming for Meta stock.

• Meta could struggle to innovate its AI features. “Scout” and Maverick,” the company’s latest AI models for Llama 4, “have dramatically trailed peers,” Oppenheimer said.
• Investors could sell Meta stock to divert proceeds to new tech IPOs.
• Meta’s ads could become less effective if privacy restrictions make it difficult for the company to track user data
• The company faces competition from the likes of Google, Microsoft, Pinterest, Twitter, and TikTok.

Oppenheimer reiterated its “Outperform” rating on the stock and lifted its price target to $775 a share, implying 9% upside from current levels.

Bank of America called Meta a “Top Online ad stock” for 2025 in a note this month.

That’s because the company looks best-positioned to reap the benefits from AI-driven advertising, analysts wrote, which they believe could support a higher valuation for the stock.

In a separate note, analysts said they expected Meta to beat consensus estimates for second-quarter earnings, pointing to positive checks the bank conducted on Meta’s advertising business. Revenue could come in around $45.5 billion, they estimated, at the higher end of Meta’s guidance for the quarter.

The bank reiterated its “Buy” rating on Meta. Earlier this month, it lifted its price target for the stock to $775 from $765, which implies 9% upside from current levels.

Second Quarter

• Revenue estimate $44.83 billion
• EPS estimate $5.89
• Advertising rev. estimate $44.07 billion
• Family of Apps revenue estimate $44.4 billion
• Reality Labs revenue estimate $386 million
• Other revenue estimate $502.4 million
• Operating income estimate $17.24 billion
• Family of Apps operating income estimate $22.16 billion
• Reality Labs operating loss estimate $4.86 billion
• Operating margin estimate 38.3%
• Ad impressions estimate +6.91%
• Average price per ad estimate +7.58%
• Average Family service users per day estimate 3.42 billion

Third Quarter

• Revenue estimate $46.21 billion
• Capital expenditure estimate $17.78 billion

Full year

• Total expenses estimate $114.01 billion
• Capital expenditure estimate $67.79 billion

Source: Bloomberg data