• 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.

• 4Q23 revenue was a slight beat on better-than-expected ad revenue. PATMI was a huge beat on higher operating leverage and stronger topline growth. FY23 revenue/PATMI were at 102%/109% of our FY23e forecasts. PATMI grew 3x YoY as expenses declined 8% YoY despite the revenue jump. Its 35% net margin was close to pandemic highs of ~40%.
• Reels finally contributing net revenue to META, driving >25% YoY growth in daily watch time across all video platforms, and were re-shared 3.5bn times daily.
• META is intensifying its capital investments, with plans on having compute worth about ~600K H100 GPUs by end-FY24e to support long-term AI development.
• We raise our FY24e revenue/PATMI by 3%/9% on stronger ad revenue and a leaner cost structure. We expect META to benefit from the recovery in digital advertising, and also to lean on AI for product improvement and efficiencies which we expect will turn into greater value for advertisers. Due to recent price movements, we downgrade to an ACCUMULATE rating from BUY, with a raised DCF target price of US$520 (prev. US$375) as we roll over an additional year of valuations. Our WACC/g assumptions remain unchanged at 7.1%/4.5%, respectively.

The Positives

+ Beat on both top and bottom line showing year of efficiency has played out well. Revenue of US$40.1bn beat our estimates by 7%, driven by a 3% FX tailwind, a 21% YoY growth in ad impressions, and a 2% YoY increase in average price per ad (CPM). CPMs grew for the first time in 2 years, driven largely by APAC+China demand. 4Q24 PATMI increased 3x YoY to US$14.0bn, as META benefitted from strong revenue growth and a much leaner workforce – headcount/total expenses were both down 22%/8% YoY, respectively.

+ Well-positioned to build the most advanced AI products with a stockpile of GPUs. META remains focused on building out its tech infrastructure, stating that it intends to have the equivalent of ~600K H100 GPUs (350K H100s + remaining 250K of other GPUs) worth of computing power by the end of FY24e. This is enough compute to support Reels, and another Reels-sized AI service. In addition, its open-source software infrastructure should help attract top AI talent to develop Llama models and other AI products.

+ Reels commentary positive, contributing net revenue to META. In 4Q23, Reels drove >25% YoY growth in daily watch time across all video types, with Reels re-shared 3.5bn times a day. Historically, Reels growth has been a headwind to overall revenue growth due to its lower monetisation levels. However, it is starting to contribute net revenue to META, with the company further expecting Reels to leverage a unified recommendation system across all META patforms to drive further views and engagement.

The Negative

- Raised top end of FY24e CAPEX guidance. META raised the top end of its CAPEX guidance for FY24e by US$2bn, to US$30bn-US$37bn, indicating it expects the need for higher levels of server capacity to support more intense AI product development. We raise our FY24e CAPEX by 3% as a result.

• 3Q23 results were within expectations. 9M23 revenue/PATMI were at 72%/73% of our FY23e forecasts. Earnings grew ~2.5x YoY as expenses declined despite the jump in revenue.
• Advertising trends continued to accelerate (24% YoY), with Reels monetisation no longer a headwind on ranking improvements and higher ad supply.
• Wide 4Q23e revenue guidance (13%-24% YoY) implying concerns over volatility in the Middle East. FY24e total expense growth reaccelerating to 10% YoY.
• We nudge our FY23e revenue estimates higher by 2% on better advertising revenue, and widen EBITDA/net margins by 1% on lower total expenses. We expect META to benefit from the recovery in digital advertising, and sustain 30+% margins given its lower cost-structure. We upgrade to a BUY rating from ACCUMULATE, with a raised DCF target price of US$375.00 (prev. US$360.00).

The Positives

+ Advertising trends continued to accelerate. META saw a huge acceleration in digital advertising revenue (3Q23: 24% YoY vs 2Q23: 12% YoY). Much of this acceleration was contributed by e-commerce companies, particularly from outbound Chinese advertisers trying to reach other markets like the US and Brazil. We expect these trends to continue improving given a typically strong 4Q holiday season, and a general recovery in the digital advertising industry.

+ Reels monetisation no longer a headwind. Reels – which has been a near-term headwind given its lower levels of monetisation, reached an inflection point. Monetisation levels for Reels finally reached net neutral to overall revenue as a result of ranking improvements and increasing ad supply. We think that this is significant given the incremental time spent on short-form video formats like Reels vs Feed/Stories. Moving forward, we expect Reels to be a modest tailwind to revenue growth as it continues to improve its monetisation levels.

+ Earnings grew ~2.5x YoY; highest margins in >2 years. PATMI increased 164% YoY, with net margins of 34%, its highest since 2Q21. Earnings also beat consensus estimates by 21% on higher revenue growth, and a leaner cost structure after significant cost-cutting measures over the last 12 months. Headcount was down -24% YoY.

The Negative

- Uncertain growth outlook for 4Q23e, increasing expenses into FY24e. META issued a fairly wide revenue guidance for 4Q23e, with a range of US$36.5bn-40bn (implying a 13%-24% YoY growth) due to concerns over increasing volatility led by geopolitical events in the middle east. It also guided to a reacceleration in total expenses growth for FY24e (10% YoY), citing increasing AI-related investments and payroll expenses.

ddle 

• 2Q23 results were in line with expectations. 1H23 revenue/PATMI at 47%/43% of our FY23e forecasts.
• Double-digit growth in advertising after 5 quarters, outbound China spending and increasing Reels monetisation the main drivers. Guided 3Q23e revenue growth of 20% YoY.
• ~US$40bn in accumulated losses from Reality Labs and no timeline to profitability. A 12% drag on operating margin.
• We increase our FY23e revenue/PATMI estimates by 3%/2% to reflect a slightly faster recovery in advertising, and improvements in Reels monetisation. Additionally, FY23e CAPEX is cut by 10% due to delays in projects and equipment deliveries. Our WACC assumption of 7.1% remains unchanged, and our terminal growth rate assumption is increased to 4.5% (from 3.5%) due to higher ad monetisation rates. We upgrade to ACCUMULATE, with a raised DCF target price of US$360.00 (prev. US$235.00).

The Positives

+ Double-digit ad growth for first time in 5 quarters. Advertising revenue grew 12% YoY in 2Q23, led predominantly by growth in outbound e-commerce spending from Chinese advertisers. Engagement on META’s family of platforms also saw healthy trends as ad impressions grew 34% YoY, with AI-recommendations also increasing user time spent on its platforms by 7%. On the products side, Reels monetisation saw improvements, with an annual revenue run-rate of US$10bn vs US$3bn a year ago. Reels saw >200bn daily plays, with >75% of advertisers using Reels Ads.

+ Positive forward guidance, continuation of advertising trends. 3Q23e revenue guidance implies a 20% YoY growth at the midpoint, a significant expected acceleration in revenue due to several factors: 1) improving advertiser demand; 2) Reels continuing to increase monetisation due to higher ad load and incremental time spent; 3) 3% FX tailwinds vs 1% headwind in 3Q22; and 4) weaker 3Q22 comps (-5% YoY). 4Q23e is expected to be similar to 3Q23e with advertising demand recovering, albeit with a larger FX tailwind.

The Negative

- Committed to metaverse vision, no timeline for Reality Labs profitability. Losses continue to mount for Reality Labs segment, with expenses related to the launching Quest 3 next year a big drag. Operating loss for 2Q23 stood at -US$3.7bn, with accumulated losses of around -US$40bn so far. Reality Labs is currently a 12% drag on operating margins, and we think it will continue to be a drag for the foreseeable future.