• • 3Q26 earnings in line with our expectations. Revenue increased 26% YoY to US$64.6bn driven by all-time high user engagement and improved ad performance, while adj. PATMI grew 2% YoY to US$19.1bn. 9M26 revenue/PATMI were at 71%/70% of our FY26e forecasts, subject to seasonality nature of ad business.
  • • META reported its first-ever quarterly negative FCF of US$2.1bn as it continued to ramp up AI investment. Adjusted operating income growth slowed to 11% YoY from 18% in 3Q25 as expenses increased 32% YoY, driven by higher legal, AI infrastructure, and third-party AI token costs. META’s operating margin declined for the third consecutive quarter to 35.4% from 36.8%.
  • • We maintained our BUY rating and raised the target price of US$780 (prev. US$750). We raised our FY26e revenue forecasts by ~1% to reflect incremental revenue from Muse AI models subscriptions and usage fees. We also increased our FY27e revenue and PATMI forecasts by 2% and 10%, respectively, to reflect further monetisation opportunities and cost efficiency measures, which are expected to support margin expansion. We believe the Class C share issuance could provide an additional funding source for META’s substantial AI spending, reducing reliance on debt financing while preserving management’s voting rights to execute its long-term strategic roadmap

The Positive
+ Solid core ad business. META’s advertising revenue grew 26% YoY to US$63.1bn in 3Q26
(3Q25: +26%), driven by 10% growth in ad impressions from stronger engagement, user
growth, and ad load optimisation, and a 14% increase in average price per ad (3Q25: +10%)
on improved ad performance. Deeper integration of META’s AI-powered content
recommendation capabilities continued to drive engagement, with Instagram and Facebook
global time spent per user on Reels and Feed reaching an all-time high, while Threads time
spent per user increased by over 20% YoY. Improvements to GEM ad-ranking models also
lifted in-app conversions by 9.6% YoY. Adoption of Meta AI Business Assistant remained
encouraging, with advertisers increasing ad spend by 9% YoY versus non-adopters.

+ Other revenue potentials. META’s other revenue grew 59% YoY, surpassing US$1bn for the
second consecutive quarter, driven by WhatsApp paid messaging and subscriptions. Meta One
has surpassed 15mn combined subscriptions and trials, reflecting early traction for META’
subscription strategy. We believe monetisation opportunities could expand through greater
small business adoption of paid subscriptions and AI tools such as Muse, could help driving
subscription uptake. Over time, we believe transaction fees from purchases facilitated through
META’s platforms could provide upside for this segment, alongside paid messaging and
subscriptions.

• 2Q26 adj. PATMI grew 2.8% YoY to US$18.9bn, with revenue up 28% YoY to US$60.8bn driven by strong user engagement and ad performance. 2Q26 revenue/PATMI were at 44%/41% of our FY26e forecasts, below our expectations as the ad business is subject to seasonality.
• META’s free cash flow (FCF) declined 91% YoY to US$784mn, driven by an 88% YoY increase in CAPEX to US$31.1bn. In 2Q26, operating income growth slowed to 9% YoY from 38% YoY in 2Q25 as expenses surged 46% YoY due to higher employee compensation, infrastructure, and third-party AI token costs. Operating margin contracted to 36.8% from 43%.
• We maintained our BUY rating but reduced the DCF target price to US$750 (prev. US$795). We lowered our FY26e revenue and PATMI forecasts by 2% and 5%, respectively, due to higher-than-expected operating expenses and management's softer revenue guidance for 3Q26e. We continue to see promising long-term AI monetisation opportunities across business agents, APIs and potential enterprise compute services.

• 1Q26 earnings below our estimates, with revenue up 33% YoY to US$56.3bn and adj. PATMI increased 13% YoY to US$18.7bn, driven by stronger engagement and better monetisation. Both 1Q26 revenue/PATMI were at 21% of our FY26e forecasts.
• META revised its FY26 capital expenditure guidance upward by ~8%, establishing a new range of US$125bn–$145bn (prev. US$115bn–$135bn). Management noted that despite aggressive capacity ramping, compute demand remains robust to scale its AI infrastructure.
• We upgraded to a BUY rating due to recent share price performance, but reduced the DCF target price to US$795 (prev. US$825). We keep FY26e revenue unchanged, but reduced PATMI forecast by ~7% due to higher-than-expected expenses and margin compression from 41% to 38%. We remain highly constructive on the long-term potential of Muse Spark, which we expect will continue to drive robust advertising revenue growth.

The Positives
+ Resilient ad performance. META delivered robust advertising performance in 1Q26, with
ad revenue reaching US$55bn, up 33% YoY (1Q25: +16%), driven by higher engagement and
improved monetisation across its Family of Apps ecosystem. The performance was supported
by the integration of Muse Spark, META’s newly launched natively multimodal reasoning
model by Meta Superintelligent Lab (MSL), which enhanced content personalisation and
recommendation capabilities across platforms. Following deployment, Instagram Reels time
spent increased 10% YoY while Facebook video time spent rose over 8% YoY, marking the
strongest QoQ engagement improvement in four years. The company also reported 19% YoY
increase in ad impressions (1Q25: +5%) and a 12% YoY rise in average price per ad (1Q25:
+10%), highlighting continued monetisation strength. Given the strong early traction and
scalability potential of Muse Spark across platforms, including WhatsApp, Instagram, and
Messenger, we maintain our FY26e advertising forecasts and continue to expect 30% YoY
revenue growth.

The Negative
- Loss-making continued in Reality Lab. META’s non-core Reality Labs segment remains
unprofitable, but operating losses narrowed ~4% YoY to US$4.2bn. (1Q25: losses +9.5%).
Segment revenue declined 2% YoY to US$885mn (1Q25: -6%), primarily due to lower Quest
headset sales. However, the company saw AI glasses continue to perform well, with daily
users growing 3x YoY.

• 4Q25 results exceeded our expectations, with revenue up 24% YoY to US$59.9bn and adj. PATMI increased 9% YoY to US$22.7bn, driven by robust ad revenue growth. FY25 revenue/PATMI were at 100%/110% of our FY25 forecasts. Earnings pulled down by Reality Labs losses of US$6bn in FY25.
• Video and Threads continued to show attractive monetisation and engagement opportunities, with Instagram Reels watch time increasing 30% YoY in the US, while FB video watch time grew double-digits.  
• We maintained ACCUMULATE rating but raised the DCF target price to US$825 (prev. US$770). As we rolled into the new financial year, our FY26e revenue and PATMI forecast was upgraded by 7% & 8% respectively, reflecting the expected continued benefits of integrating LLMs with META’s recommendation models, which should further enhance ad efficiency and pricing.

The Positives
Continued strong AI-led ad performance. META delivered robust advertising performance in
4Q25, with ad revenue reaching US$58.1bn, up 24% YoY (4Q24: +21% YoY) driven by higher
user engagement and strong advertiser demand supported by improved ad efficiency.
Looking ahead, we expect FY26e revenue growth to remain underpinned by broad-based AI
improvements, with particularly attractive monetisation and engagement opportunities in
video and Threads. In the US, Instagram Reels watch time increased 30% YoY following
improvements in recommendation quality, and Facebook video watch time grew double
digits YoY supported by ranking and product enhancements across feed and video surfaces.
Continued model optimisation lifted organic Feed and video views by 7%, delivering the
largest quarterly revenue impact from Facebook product launches in the past two years, while
time spent on Threads rose 20% following recommendation upgrades. Based on this
momentum, we increased our FY26e ad revenue forecast by 7%, expecting 30% YoY revenue
growth.

Resilient WhatsApp performance. In 4Q25, META’s Family of Apps “other” revenue grew 54%
YoY to US$8.1bn, supported by WhatsApp paid messaging and Meta verified subscription
(4Q24: +55% YoY). Business messaging maintained strong momentum, with click-to-message
ads in the US rising more than 50% YoY, driven by robust adoption of website-to-message
ads, which guide users to the business’s website for more information before initiating a chat.
Additionally, paid messaging continues to scale, reaching an annual run-rate of over US$2bn
in 4Q25.

The Negative
Unprofitable in Reality Lab. META’s non-core Reality Labs segment remains unprofitable, with
operating losses widening 21% YoY to US$6bn. (4Q24: losses +7% YoY). Segment revenue
declined 12% YoY, primarily due to a high base following the launch of Quest 3S in 4Q24 and
earlier revenue realisation from retail partners’ headset purchases ahead of the holiday season
in 3Q25. Looking ahead, META expects Reality Labs' operating losses to have peaked, with FY26e
losses broadly in line with FY25 levels (FY25: US$19.2bn) before gradually narrowing thereafter.
Strategically, the company plans to focus investment on glasses, where sales more than tripled
in FY25, while working toward building a profitable virtual reality (VR) ecosystem over the longer
term.

Higher CAPEX going into FY26e. In 4Q25, META’s CAPEX nearly doubled to US$22.1bn (4Q24:
+88% YoY) with the majority of spending directed toward data centres, servers, and network
infrastructure. For FY26e, the company has guided CAPEX to US$115bn–US$135bn to support
its core advertising business and the expansion of Meta Superintelligent Lab (MSL). If spending
reaches the top end of guidance, it would imply ~87% YoY CAPEX growth. Despite aggressive AI
spending, META’s free cash flow grew 7% YoY in 4Q25. The surge in CAPEX is expected to weigh
on valuations in the short term due to higher depreciation and AI-related expenses, which rose
40% YoY in 4Q25 (4Q24: +5%). However, we believe the impact should be offset by robust
revenue growth in core advertising segment. We think the company demonstrated a strong
ability to monetise existing products while effectively expanding its potential pipelines to grow
its advertising ecosystem

• 3Q25 results exceeded our expectations, with revenue up 26% YoY to US$51.2bn and adj. PATMI increased 19% YoY to US$18.6bn from strong ad revenue growth. 9M25 revenue/PATMI was at 70%/87% of our FY25e forecasts.
• AI continues to deliver strong ad results, with better user engagement and ad performance leading to a 10% YoY increase in ad prices and 14% YoY growth in impressions. Instagram now has 3bn monthly active users (MAUs).
• We maintained ACCUMULATE rating but reduce the DCF target price to US$770 (prev. US$830). We raise our FY25e PATMI forecast by 14%, driven by lower-than-expected non-research and development (non-R&D) expenses. Our WACC remains at 7.5%, but we have reduced the terminal growth rate to 5.4% (from 6.0%) to reflect the impact of META’s significant CAPEX commitments in growing Superintelligent Lab. However, we think the investment size remains reasonable given the intense competition and the fact that META still has strong monetisation power through its product offerings.

• 2Q25 results were within our expectations. 1H25 revenue/PATMI was at 46%/59% of our FY25e forecasts due to strong ad revenue growth and resilient operating margin.
• AI continues to drive strong ad results, with better user engagement and ad performance leading to a 9% YoY increase in ad prices and 11% YoY growth in impressions. META AI now exceeds 1bn monthly active users (MAUs).
• We increase our FY25e total revenue forecast by ~3.5% due to META’s improved ad capabilities, which we expect to boost ad revenue. We maintain our ACCUMULATE rating, while our DCF target price is raised to US$830 (prev. US$720). We believe META’s ongoing investments in AI infrastructure and LLM development will enhance its core product offerings, further strengthening its ad business. We also expect these efforts to present monetisation potential in untapped segments, such as video, Threads, and business messaging. 

• META now has more than 3.4bn daily active users, guiding for CAPEX of US$64bn–US$72bn for FY25e to boost AI-related investment for long-term growth opportunities.
• AI driving better ad performance, leading to higher average ad prices (+10% YoY). Solid growth momentum in WhatsApp and Threads is predicted to have a bigger revenue contribution.
• We increase our FY25e revenue forecast by 5% due to resilient ad revenue and expanding margins. We maintain our ACCUMULATE rating, while our DCF target price is raised to US$720 (prev. US$640). Our growth rate assumption is also increased to 6% (prev. 5%). We believe META’s efforts to build stronger AI infrastructure and LLM development to utilise AI technology for product improvement fully present great monetisation opportunities in the long run.

• 3Q24 results outperformed, with META’s US$40.6bn revenue at the high end of its guidance range. META’s net margin grew by 5% points YoY, even with a 9% increase in headcount. 9M24 revenue/PATMI were at 73%/79% of our FY24e forecasts.
• AI driving better ad performance, leading to higher average ad prices (+11% YoY). Average price per ad growth accelerated for a fourth straight quarter.
• We increase our FY24e revenue/PATMI forecast by 2%/14% due to stronger Ad revenue and more cost efficiencies. We maintain our ACCUMULATE rating, while our DCF target price is raised to US$640 (prev. US$555). Our growth rate assumption is also increased to 5% (prev. 4.5%). Like GOOGL, we view META as a leader in AI, given its best-in-class AI infrastructure and LLM (Llama 3.2) and its ability to leverage AI technology to improve existing product monetization effectively.

• 2Q24 results outperformed, with META’s US$39.1bn revenue above the top end of its guidance range due to stronger ad growth. Net margin grew 10% points YoY. 1H24 revenue/PATMI were at 48%/52% of our FY24e forecasts.
• Ad revenue growth of 22% YoY was due to increasing ad impressions (+10% YoY) and prices (+10% YoY). Average price per ad growth accelerated for a third straight quarter.
• We increase our FY24e revenue/PATMI forecast by 2%/5% due to stronger Ad revenue. We maintain our ACCUMULATE rating, while our DCF target price is raised to US$555 (prev. US$510). Our WACC/growth rate assumptions remain unchanged at 7.1%/4.5%, respectively. Like GOOGL, we view META as a leader in AI given its best-in-class AI infrastructure and LLM (Llama 3), and its ability to leverage AI technology to improve existing product monetisation effectively.

• 1Q24 results outperformed slightly, with META’s US$36.5bn revenue at the top end of its guidance range due to an acceleration in ad growth. PATMI was above due to lower network delivery costs. 1Q24 revenue/PATMI were at 24%/25% of our FY24e forecasts. 1Q is historically the weakest quarter of the year.
• +27% YoY ad revenue growth a result of increasing ad impressions (+20% YoY) and prices (+6% YoY), with AI-related content driving greater user engagement.
• Higher CAPEX spending over the next two years as META develops more advanced models, and builds out its own silicon capabilities (MTIA Chip).
• We keep our FY24e revenue/PATMI forecast unchanged but increase FY24e CAPEX by 10% (~US$3bn) to account for higher AI infrastructure spending. As a result, our DCF target price is lowered to US$510 (prev. US$520), while we maintain ACCUMULATE. Our WACC/growth rate assumptions remain unchanged at 7.1%/4.5%, respectively.

The Positives

+ AI content driving greater engagement, leading to higher ad revenue. META continues to leverage its AI capabilities to improve engagement on its apps, indirectly leading to higher ad revenue (+27% YoY). META’s AI recommendation system now contributes roughly half of all content users see on Instagram, driving more value for advertisers. The demand-supply dynamics of digital ads are also improving, with META seeing healthy 20+% YoY growth in impressions and a 2^nd consecutive quarter of YoY advertising price increases. E-commerce companies remained the largest contributor to advertising revenue growth.

+ Positive momentum for Video/Reels. Video engagement continues to be a bright spot for META, contributing to >60% of viewing time on both FB and IG. Reels remain the key driver for this growth, with its strong ramp throughout FY23. Reels monetisation is also improving with META leveraging AI for more optimised ad loads and placements.

The Negatives

- Higher CAPEX spending moving forward. META is doubling down on scaling its AI capabilities to develop more advanced and compute-intensive models while also scaling its training and inferencing needs (custom silicon). As a result, FY24e CAPEX guidance was raised by ~US$4bn to a range of US$35bn-US$40bn. It expects this investment cycle to take at least 2 years to complete.

- Decelerating revenue growth for 2Q24e. META guided to 2Q24e revenue growth of ~18% YoY, implying a deceleration in growth as it: 1) laps a period of tougher comparisons due to China recovery from early-FY23, 2) slower increase in Reels’ advertising load after an initial aggressive ramp, 3) ~1% YoY impact from a strengthening USD.