Meta's Earnings Phenomenon: Absolute Growth Exceeds All Expectations

Meta delivered absolutely spectacular results for Q2 2025, surpassing expectations across virtually all key metrics. The company's shares rose by nearly 10% in after-hours trading, signaling potential new all-time highs. This marks the 12th consecutive quarter that Meta has exceeded revenue expectations, underscoring a consistent growth strategy fueled by investments in artificial intelligence.

Key Financial Figures Versus Expectations

• EPS: $7.14 vs. expected $5.89 (+$1.25, 21% beat)

• Revenue: $47.52B vs. expected $44.83B (+$2.69B, 6% beat)

• Advertising Revenue: $46.56B vs. expected $44.07B (+$2.49B, 6% beat)

• Operating Margin: 43% vs. expected 38.3% (4.7 percentage point beat)

• Operating Income: $20.44B vs. expected $17.24B (+$3.20B, 19% beat)

Key Advertising Metrics

• Ad Impressions Growth: 11% y/y vs. expected 6.9%

• Average Price per Ad Growth: 9% y/y vs. expected 7.6%

• Daily Active Users (DAU): 3.48 billion vs. expected 3.42 billion (60M user beat)

The Key Unknown – Reality Labs

• Revenue: $370M vs. expected $386M (-$16M, the only significant disappointment, but negligible given strong beats across all other figures)

• Operating Loss: $4.53B vs. expected $4.86B (loss narrowed relative to expectations, but still no clear path to profitability)

Other Key Indicators

• Family of Apps Revenue: $47.15B vs. expected $44.48B ($2.67B beat)

• Family of Apps Operating Income: $24.97B vs. expected $22.16B ($2.81B beat)

• Q2 Capital Expenditure (CapEx): $17.01B (significant year-over-year increase for AI investments)

• Employee Growth: 7% y/y to 75,945 employees

Absolutely Phenomenal Advertising Business Growth

The biggest surprise from these results is the absolutely phenomenal health of Meta's advertising business. The company not only maintained its growth momentum but accelerated it, demonstrating that massive investments in artificial intelligence are indeed translating into tangible business benefits. An 11% annual increase in ad impressions combined with a 9% rise in ad prices is a combination analysts did not anticipate at such intensity.

What is particularly impressive is that Meta achieved these results in an environment where many platforms grapple with challenges related to market saturation in advertising. Meanwhile, Zuckerberg's platform shows that, thanks to AI-powered algorithms, it can simultaneously deliver more impressions and justify higher prices for advertisers. Moreover, the company is deploying ads in an increasing number of applications, also indicating potential for further growth in the future.

Profitability at Record Levels

An operating margin of 43% is a result that exceeds analysts' wildest expectations. Even more impressive is that Meta achieved this profitability in a quarter where it spent a record $17.01 billion on capital investments, primarily related to AI infrastructure. This demonstrates the company's exceptional operational efficiency and its ability to generate cash flows that fund future growth. Crucially for investors, the higher capital expenditures are fully justified by increased demands from applications.

Operating income of $20.44 billion, surpassing expectations by nearly 19%, showcases the scalability of Meta's business model. Every additional dollar of revenue translates into significantly more than a dollar of operating profit, which is the dream of every investor seeking companies with high operating leverage.

Reality Labs – Still a Major Issue, But With a Glimmer of Hope

Reality Labs remains the biggest pain point for investors, but the situation appears to be stabilizing, although a full resolution of the problem is still very distant. Although revenue of $370M was slightly disappointing compared to the expected $386M, the operating loss turned out to be better than forecasts by over $300M. An annual loss of approximately $18B, while still enormous, is lower than earlier pessimistic scenarios projecting $20B in annual losses.

It will be crucial to observe whether Meta presents a concrete path to profitability for this segment in subsequent quarters, or if it will continue to be treated as a long-term investment in the future without clear financial milestones. Investors, however, believe that, similar to advertising, the company will be able to translate augmented reality into greater profits.

Optimistic Future Guidance

• Q3 2025 Revenue: $47.5-50.5B vs. consensus $46.2B (midpoint beats consensus by ~6%)

• FY 2025 CapEx: $66-72B (narrowed from previous $64-72B)

• FY 2025 Expenses: $114-118B (narrowed from $113-118B)

• Warning: Q4 2025 growth will be slower than Q3 (base effect)

Meta presented Q3 2025 guidance that again surpasses market expectations. The company anticipates very strong revenues, and an interesting point of the forecasts is the narrowing of CapEx. Earlier, investors feared that an increase without a corresponding increase in productivity would only indicate cost inflation. The narrowing of capital expenditure guidance may signal better cost control, although the lower bound has increased, indicating continued massive investments in AI infrastructure.

Challenges and Risks on the Horizon

Meta is transparent with investors about significant challenges that could affect future results. Particularly concerning are warnings regarding the regulatory situation in the European Union, where the European Commission may force further modifications to the Less Personalized Ads model. As the company itself admits, this could "significantly negatively impact European revenues as early as Q3."

Additionally, the CFO warns of accelerating expense growth in 2026, primarily due to rising depreciation costs of expanded AI infrastructure and full-year compensation costs for employees hired in 2025. This could mean pressure on margins in the coming year, although with the current pace of revenue growth, the company should be able to manage.

Summary – The AI Revolution Continues to Pay Off

Meta presented results that undeniably prove that massive investments in artificial intelligence are yielding tangible business benefits. The company demonstrated its ability to not only maintain its dominance in the social media segment but also effectively monetize future technologies.

These results position Meta as one of the best-placed beneficiaries of the AI revolution among technology companies. The combination of record profitability, strong organic growth, and effective cost control, alongside massive investments in the future, is a scenario long-term investors dream of.

Considering the 12th consecutive quarter of exceeding expectations and optimistic guidance for future periods, Meta confirms its position as one of the most predictable and profitable growth engines in the technology sector. It's also worth noting that prior to these results, the company's valuation appeared very attractive compared to other Mag7 companies. The company is currently gaining approximately 9% in after-hours trading, which could potentially mean new all-time highs in tomorrow's Wall Street session.