Q3 2025 Meta Platforms Inc Earnings Call

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to withdraw your question again press Star one we ask that you limit yourself to one question and this call will be recorded. Thank you very much kind of Doral Meddits director of.

Investor Relations you may begin.

Thank you good afternoon, and welcome to <unk> third quarter 2025 earnings conference call joining.

Joining me today are Mark Zuckerberg, CEO and Susan Lee CFO of.

Our remarks today will include forward looking statements, which are based on assumptions as of today.

Actual results may differ materially as a result of various factors, including those set forth in todays earnings press release and in our quarterly report on Form 10-Q filed with the SEC.

We undertake no obligation to update any forward looking statement.

During this call we will present, both GAAP and certain non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, the earnings press release, and an accompanying investor presentation are available on our website at investor Dot at meta Dot com.

And now I'd like to turn the call over to Mark.

Right. Thanks, Ken Thanks, everyone for joining today, we had another strong quarter with $3 5 billion people using at least one of our apps every day Instagram hit a major milestone with 3 billion monthly actives and we're seeing good momentum across our other apps as well, including threads, which recently passed 150 million daily.

Actives and remains on track to become a leader in its category.

Kenneth Dorell: You.

Speaker #1: A .

I am very focused on establishing <unk> as the leading frontier AI lab.

Speaker #2: Good afternoon . My name is Krista and I will be your conference operator today . this time , I would like to welcome everyone to the meta third quarter earnings conference call .

Susan Li: Good afternoon. My name is Krista and I will be your conference operator today. At this time I would like to welcome everyone to the Meta third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press Star Star 1 on your telephone keypad. To withdraw your question, press Star 1. We ask that you limit yourself to one question and this call will be recorded. Thank you very much. Kenneth Dorell, Meta's Director of Investor Relations.

Building personal superintendents for everyone and delivering the app experiences and computing devices that will improve the lives of billions of people around the world.

Speaker #2: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .

Our approach of advancing open source say I means that when met our innovate everyone benefits.

Super Intelligence labs is off to a strong start.

I think that we've already built the lab would be highest talent density in the industry. We're heads down developing our next generation of models and products and I'm looking forward to sharing more on that front over the coming months.

Speaker #2: We ask that you limit yourself to one question , and this call will be recorded . Thank you very much . Kenneth Dorell Metas Director of Investor Relations .

We're also building what we expect to be an industry, leading amount of compute now.

Speaker #2: You may begin .

Kenneth Dorell: You may begin. Thank you. Good afternoon and welcome to Meta Platforms' third quarter 2025 earnings conference call. Joining me today are Mark Zuckerberg, CEO, and Susan Li, CFO. Our remarks today will include forward-looking statements which are based on assumptions. As of today, actual results may differ materially as a result of various factors, including those set forth in today's earnings press release and in our quarterly report on Form 10-Q filed with the SEC. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investor.appmeta.com. Now I'd like to turn the call over to Mark. All right, thanks Ken. Thanks everyone for joining.

Speaker #3: Thank you . Good afternoon and welcome to metas third quarter 2020 earnings conference call . Joining me today are Mark Zuckerberg , CEO , and Susan Li , CFO .

Now Theres a range of timelines for when people think that we're gonna get Super intelligence. Some people think that we'll get there in a few years, others think it will be five seven years or longer.

Speaker #3: Our remarks today will include forward looking statements , which are based on assumptions as of today . Actual results may differ materially as a result of various factors , including those set forth in today's earnings press release and in our quarterly Report on Form 10-q filed with the SEC .

I think that it's the right strategy to aggressively Frontload building capacity. So that we were prepared for the most optimistic cases that way if super intelligence arrived sooner, we will be ideally positioned for a generational paradigm shift in many large opportunities. If it takes longer then we'll use the extra compute to accelerate our COO.

Speaker #3: We undertake no obligation to update any forward looking statement during this call . We will present both GAAP and certain non-GAAP financial measures .

Core business, which continues to be able to profitably use much more compute than we've been able to throw at it.

Speaker #3: A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release . The earnings press release and an accompanying investor presentation are available on our website at investor .

And we're seeing very high demand for additional compute both internally and externally.

And in the worst case.

Speaker #3: Com . And now I'd like to turn the call over to Mark .

We would just slow building new infrastructure for some period, while we grow into what we build.

Speaker #4: All right. Thanks, Ken, and everyone for joining today. We had another strong quarter with 3.5 billion people using at least one of our apps every day.

Kenneth Dorell: Today we had another strong quarter with 3.5 billion people using at least one of our apps every day. Instagram hit a major milestone with 3 billion monthly actives, and we're seeing good momentum across our other apps as well, including Threads, which recently passed 150 million daily actives and remains on track to become the leader in its category. I am very focused on establishing Meta as the leading frontier AI lab, building personal superintelligence for everyone, and delivering the app experiences and computing devices that will improve the lives of billions of people around the world. Our approach of advancing open source AI means that when Meta innovates, everyone benefits. Meta Superintelligence Labs is off to a strong start. I think that we've already built the lab with the highest talent density in the industry.

The upside is extremely high for both our existing apps and new products and businesses that are becoming possible to build.

Speaker #4: Instagram hit a major milestone with 3 billion monthly actives , and we're seeing good momentum across our other apps as well , including threads , which recently passed 150 million daily actives and remains on track to become the leader in its category .

Across Facebook, Instagram and threads, our AI recommendation systems are delivering higher quality and more relevant content, which led to 5% more time spent on Facebook in Q3, and 10% on threads video is a particular bright spot with video time spent on Instagram up more than 30% since last year.

Speaker #4: I am very focused on establishing meta as the leading frontier AI lab building , personal superintelligence for everyone and delivering the app experiences and computing devices that will improve the lives of billions of people around the world .

And as video continues to grow across our apps Reals now has an annual run rate of over $50 billion.

Speaker #4: Our approach of advancing open source AI means that when meta everyone benefits . Meta superintelligence labs is off to a strong start . I think that we've already built the lab with the highest talent density in the We're heads down developing our next generation of models and products , and I'm looking forward to sharing more on that front over the coming months .

Improvements in our recommendation systems will also become even more leveraged as the volume of AI created content grows.

Social media has gone through two eras so far.

First was when all content was from friends family and accounts that you follow directly the second was when we added all of the creative content.

Kenneth Dorell: We're heads down developing our next generation of models and products, and I'm looking forward to sharing more on that front over the coming months. We're also building what we expect to be an industry-leading amount of compute. Now there's a range of timelines for when people think that we're going to get superintelligence. Some people think that we'll get there in a few years, others think it will be five, seven years, or longer. I think that it's the right strategy to aggressively front load building capacity so that way we're prepared for the most optimistic cases. That way, if superintelligence arrives sooner, we will be ideally positioned for a generational paradigm shift and many large opportunities.

Now as AI it makes it easier to create and remix content, we're going to add yet another huge corpus of content on top of those.

Speaker #4: We're also building what we expect to be an industry leading amount of compute . Now there's a range of timelines for when people think that we're going to get superintelligence .

Recommendation systems that understand all of this content more deeply and can show you. The right content to help you achieve your goals are going to be increasingly valuable.

Speaker #4: Some people think that we'll get there in a few years . Others think it will be five seven years or longer . I think that it's the right strategy to aggressively front building capacity .

Our ads business continues to perform very well largely due to improvements in our AI ranking systems as well this quarter, we saw meaningful advances from unifying different models into simpler more general models, which drive both better performance and efficiency.

Speaker #4: So that way we're prepared for the most optimistic cases. That way, if superintelligence arrives sooner, we will be ideally positioned for a generational paradigm shift in many large opportunities.

Speaker #4: If it takes longer, then we'll use the extra compute to accelerate our core business, which continues to be able to profitably use much more compute than we've been able to throw at it.

Kenneth Dorell: If it takes longer, then we'll use the extra compute to accelerate our core business, which continues to be able to profitably use much more compute than we've been able to throw at it. We're seeing very high demand for additional compute both internally and externally. In the worst case, we would just slow building new infrastructure for some period while we grow into what we build. The upside is extremely high for both our existing apps and new products and businesses that are becoming possible to build across Facebook, Instagram, and Threads. Our AI recommendation systems are delivering higher quality and more relevant content, which led to 5% more time spent on Facebook and 10% on Threads.

And now the annual run rate going through are completely end to end AI powered AD tools has passed $60 billion.

And one way that I think about our company overall is that there are three giant transformers that run Facebook Instagram and adds recommendations.

Speaker #4: And we're seeing very high demand for additional compute , both internally and externally . And in the worst case , we would just slow building new infrastructure period while we grow into what we build .

Have a very strong pipeline of lots of ways to improve these models by incorporating new AI advances and capabilities.

And at the same time, we're also working on combining these three major AI systems into a single unified AI system that will effectively run our family of apps and business.

Speaker #4: The upside is extremely high for both our existing apps and new products . And businesses that are becoming possible to build across Facebook , Instagram and threads .

Using increasing intelligence to improve the trillions of recommendations that will make for people every day.

Speaker #4: Our AI recommendation systems are delivering higher quality and more relevant content , which led to 5% more time spent on Facebook and Q3 and 10% on threads .

I'm also very excited about the new products that we're going to be able to build.

More than a billion monthly actives already use meta AI and we see usage increase as we improve our underlying models I'm very excited to get a frontier model into meta AI and I think that the opportunity. There is very large the same goes for our business AI everyday people have more than 1 billion active threads with business occur.

Speaker #4: Video is a particular bright spot , with video time spent on Instagram up more than 30% since last year . And as video continues to grow across our apps , Reels now has an annual run rate of over $50 billion .

Kenneth Dorell: Video is a particular bright spot, with video time spent on Instagram up more than 30% since last year, and as video continues to grow across our apps, Reels now has an annual run rate of over $50 billion. Improvements in our recommendation systems will also become even more leveraged as the volume of AI-created content grows. Social media has gone through two eras so far. First was when all content was from friends, family, and accounts that you followed directly. The second was when we added all of the creator content. Now, as AI makes it easier to create and remix content, we're going to add yet another huge corpus of content on top of those. Recommendation systems that understand all this content more deeply and can show you the right content to help you achieve your goals are going to be increasingly valuable.

Speaker #4: Improvements in our recommendation systems will also become even more leveraged as the volume of AI created content grows , social media gone through two eras so far .

It's across our messaging platforms ranging from product questions to customer support.

Our business. He is will enable tens of millions of businesses to scale. These conversations and improve their sales at low cost and the better our models get better. This is going to work for all businesses.

Speaker #4: First was when all content was from friends , family , and accounts that you followed directly . The second was when we added all of the creator content .

Speaker #4: Now , as AI makes it easier to create and remix content , we're going to add yet another huge corpus of content on top of those recommendation systems that understand all this content more deeply and can show you the right content to help you achieve your goals , are going to be increasingly valuable .

This quarter, we also launched vibes, which is the next generation of our AI creation tools and content experiences retention is looking good so far.

And its usage keeps growing quickly week over week I'm looking forward to ramping up the growth of vibes over the coming months.

Speaker #4: Our ads business perform largely due to improvements in our AI ranking systems as well . This quarter , we saw meaningful advances from unifying different models into simpler , more general models , which drive both better performance and efficiency .

Kenneth Dorell: Our ads business continues to perform very well, largely due to improvements in our AI ranking systems as well. This quarter, we saw meaningful advances from unifying different models into simpler, more general models, which drive both better performance and efficiency. Now the annual run rate going through our completely end-to-end AI-powered ad tools has passed $60 billion. One way that I think about our company overall is that there are three giant transformers that run Facebook, Instagram, and Ads recommendations. We have a very strong pipeline of lots of ways to improve these models by incorporating new AI advances and capabilities. At the same time, we are also working on combining these three major AI systems into a single unified AI system that will effectively run our family of apps and business using increasing intelligence to improve the trillions of recommendations that we'll make for people every day.

More broadly I think that vibes as an example of a new content type enabled by AI and I think there were more opportunities to build many more novel types of content ahead as well.

As our new models become ready I'm looking forward to starting to show everyone. Some of the new kinds of products that we're working on.

Speaker #4: And now the annual run rate going through our completely end to end AI powered ad tools has passed $60 billion . Now , one way that I think about our company overall is that there are three giant transformers that run Facebook , Instagram and ads recommendations .

At connect we.

We announced our 2025 line of AI glasses, and the response, so far has been great. The new Ray ban medical losses in Oakley meta vanguard's are both selling well as people loved improve battery life camera resolution, new AI capabilities and the great design.

Speaker #4: We have a very strong pipeline of lots of ways to improve these models by incorporating new AI advances and capabilities , and at the same time , we were also working on combining these three major AI systems into a single unified AI system that will effectively run our family of apps and business using increasing intelligence to improve the trillions of recommendations that will make for people every day .

And there's are a new better ray ban display glasses, our first glasses with a high resolution display and the meta neural band to interact with them. They sold out and almost every store within 48 hours with demo slots fully booked through the end of next month.

So we're gonna have to invest in and increasing manufacturing and selling more of those this is an area, where we are clearly leading and have a huge opportunity ahead.

Speaker #4: I'm also very excited about the new products that we're going to be able to build . More than very well , a billion monthly actives already use meta AI , and we see usage increase as we improve our underlying models .

Kenneth Dorell: I'm also very excited about the new products that we're going to be able to build. More than a billion monthly actives already use Meta AI, and we see usage increase as we improve our underlying models. I'm very excited to get a frontier model into Meta AI, and I think that the opportunity there is very large. The same goes for our business AI. Every day, people have more than 1 billion active threads with business accounts across our messaging platforms, ranging from product questions to customer support. Our business AIs will enable tens of millions of businesses to scale these conversations and improve their sales at low cost. The better our models get, the better this is going to work for all businesses. This quarter, we also launched Vibes, which is the next generation of our AI creation tools and content experiences.

Taking a step back if we deliver even a fraction of the opportunity ahead for our existing apps and the new experiences that are possible. Then I think for the next few years will be the most exciting period in our history, we've got a lot to do.

Speaker #4: I'm very excited to get a frontier model into meta AI , and I think that the opportunity there is very large . The same goes for our business AI .

Speaker #4: Every day people have more than 1 billion active threads with business accounts across our messaging platforms , ranging from product questions to customer support .

But we're making real progress delivering strong business results building the talent density and infrastructure needed for the next era and leading the way on AI devices that will define the next computing platform.

Speaker #4: Our business eyes will enable tens of millions of businesses to scale these conversations and improve their sales at low cost . And the better our models get , the better this is going to work for all businesses .

I'm proud of how our teams are rising to the challenge and I'm grateful for their dedication hard work and creativity as always thank you all for being a part of this journey with us and now here's Susan.

Speaker #4: This quarter , we also launched vibes , which is the next generation of our AI creation tools and content experiences . Retention is looking good so far , and its usage keeps growing quickly week over week .

Thanks, Mark and good afternoon, everyone lots.

Let's begin with our segment results all comparisons are on a year over year basis, unless otherwise noted.

Kenneth Dorell: Retention is looking good so far, and its usage keeps growing quickly week over week. I'm looking forward to ramping up the growth of Vibes over the coming months. More broadly, I think that Vibes is an example of a new content type enabled by AI, and I think that there are more opportunities to build many more novel types of content ahead as well. As our new models become ready, I'm looking forward to starting to show everyone some of the new kinds of products that we're working on. At Connect, we announced our 2025 line of AI glasses, and the response so far has been great. The new Ray-Ban Meta AI glasses and Oakley Meta Vanguards are both selling well, as people love the improved battery life, camera resolution, new AI capabilities, and the great design.

Our community across the family of apps continues to grow and we estimate more than $3 5 billion people used at least one of our family of apps on a daily basis in September.

Speaker #4: I'm looking forward to ramping up the growth of vibes over the coming months . More broadly , I think that vibes is an example of a new content type enabled by AI , and I think that there are more opportunities to build many more novel types of content ahead as well as our new models become ready .

Q3 total family of apps revenue was $58 billion up 26% year over year.

Speaker #4: I'm looking forward to starting to show everyone some of the new kinds of products that we're working on at connect , we announced our 2025 line of AI glasses and the response so far has been great .

Q3 family of apps AD revenue was $15 1 billion up 26% or 25% on a constant currency basis.

In Q3, the total number of AD impressions served across our services increased 14%.

Speaker #4: The new Ray-Ban meta glasses and Oakley meta Vanguards are both selling well , as people love the improved battery life . Camera resolution , new AI capabilities , and the great design and there's a new meta Ray-Ban display glasses .

Impression growth was healthy across all regions, driven by engagement and user growth, particularly on video surfaces.

Kenneth Dorell: There are our new Meta Ray-Ban display glasses, our first glasses with a high-resolution display and the Meta Neural band to interact with them. They sold out in almost every store within 48 hours, with demo slots fully booked through the end of next month. We are going to have to invest in increasing manufacturing and selling more of those. This is an area where we are clearly leading and have a huge opportunity ahead. Taking a step back, if we deliver even a fraction of the opportunity ahead for our existing apps and the new experiences that are possible, then I think that the next few years will be the most exciting period in our history.

The average price per AD increased 10% year over year benefiting from increased advertiser demand largely driven by improved AD performance. This was partially offset by impression growth, particularly from lower monetizing regions and surfaces.

Speaker #4: Our first glasses with a high resolution display and the meta neural band to interact with them . They sold out in almost every store within 48 hours with demo slots fully booked through the end of next month .

Speaker #4: So we're going to have to invest in increasing manufacturing and selling more of those . This is an area where we are clearly leading and have a huge opportunity ahead .

Sure.

Family of apps other revenue was $690 million up 59% driven by Whatsapp paid messaging revenue growth as long as meta verifying subscriptions.

Speaker #4: Taking a step back, if we deliver even a fraction of the opportunity ahead for our existing apps and the new experiences that are possible, then I think that the next few years will be the most exciting period in our history.

Within our reality Labs segment, Q3 revenue was $470 million up 74% year over year.

The significant year over year growth in Q3 was partly due to retail partners stocking up on quest headsets ahead of the holiday season.

Speaker #4: We've got a lot to do, but we're making real progress delivering strong business results, building the talent density and infrastructure needed for the next era, and working on AI devices that will define the next computing platform.

Kenneth Dorell: We've got a lot to do, but we're making real progress, delivering strong business results, building the talent density and infrastructure needed for the next era, and leading the way on AI devices that will define the next computing platform. I'm proud of how our teams are rising to the challenge, and I'm grateful for their dedication, hard work, and creativity. As always, thank you all for being a part of this journey with us. Now, here's Susan.

We did not have a similar benefit in the third quarter of last year since our quest three S. Headset launched in the fourth quarter of 2024.

Speaker #4: I'm proud of how our teams are rising to the challenge , and I'm grateful for their dedication , hard work , and creativity .

Aside from this strong AI glasses revenue also contributed to revenue growth in Q3.

Speaker #4: As always, thank you all for being a part of this journey with us. And now, here's Susan.

Moving now to our consolidated results.

Speaker #5: Thanks , Mark , and good afternoon , everyone . Let's begin with our segment results . All comparisons are on a year over year basis unless noted .

Susan Li: Thanks Mark, and good afternoon everyone. Let's begin with our segment results. All comparisons are on a year over year basis unless otherwise noted. Our community across the family of apps continues to grow and we estimate more than 3.5 billion people used at least one of our family of apps on a daily basis in September. Q3 total family of apps revenue was $50.8 billion, up 26% year over year. Q3 family of apps ad revenue was $50.1 billion, up 26% or 25% on a constant currency basis. In Q3, the total number of ad impressions served across our services increased 14%. Impression growth was healthy across all regions, driven by engagement and user growth, particularly on video surfaces. The average price per ad increased 10% year over year, benefiting from increased advertiser demand, largely driven by improved ad performance.

Q3, total revenue was $51 $2 billion up 26% or 25% on a constant currency basis.

Speaker #5: Our community across the family of apps continues to grow , and we estimate more than 3.5 billion people use at least one of our family of apps on a daily basis .

Q3, total expenses were $30 $7 billion up 32% compared to last year.

Year over year expense growth accelerated 20 percentage points from Q2, due primarily to three factors.

Speaker #5: In September , Q3 total family of apps revenue was $50.8 billion , up 26% year over year . Q3 family of apps ad revenue was $50.1 billion , up 26% , or 25% , on a constant currency basis in Q3 , the total number of admissions served across our services increased 14% .

First legal related expense growth was higher than in Q2 due to charges. We recorded in the third quarter as well as us lapping a period of accrual reversals in the third quarter a year ago.

Second employee compensation growth accelerated driven by technical hires, particularly AI talent.

Speaker #5: Impression growth was healthy across all regions , driven by engagement and user growth , particularly on video services . The average price per increased 10% year over year , benefiting from increased advertiser demand , largely driven by improved ad performance .

Finally growth in infrastructure costs accelerated due to increased infrastructure operating costs associated with our expanded data center fleet depreciation on our incremental Capex spend and third party cloud spend.

We ended Q3 with over 78400 employees up 8% year over year, driven by hiring in priority areas of monetization infrastructure reality labs met a super intelligence labs, as well as regulation and compliance.

Speaker #5: This was partially offset by impression growth , particularly from lower monetizing regions and services . Family of apps . Other revenue was $690 million , up 59% , driven by WhatsApp paid messaging revenue growth , as well as meta verified subscriptions within our Reality Labs segment .

Susan Li: This was partially offset by impression growth, particularly from lower monetizing regions and services. Family of apps other revenue was $690 million, up 59%, driven by WhatsApp paid messaging revenue growth as well as Meta Verified subscriptions. Within our Reality Labs segment, Q3 revenue was $470 million, up 74% year over year. The significant year over year growth in Q3 was partly due to retail partners stocking up on Quest headsets ahead of the holiday season. We did not have a similar benefit in the third quarter of last year since our Quest 3S headset launched in.

Third quarter operating income was $20 $5 billion, representing a 40% operating margin.

Speaker #5: Q3 revenue was $470 million , up 74% year over year . The significant year over year growth in Q3 was partly due to retail partners stocking up on quest headsets ahead of the season .

Q3 interest and other income was $1 $1 billion, driven primarily by unrealized gains on our marketable equity securities.

Our tax rate for the quarter was 87%, which was unfavorably impacted by a one time noncash reduction in deferred tax assets that we no longer anticipate using under new U S tax law.

Speaker #5: We did not have a similar benefit in the third quarter of last year since our Quest 3 headset launched in the fourth quarter of 2020.

Kenneth Dorell: The fourth quarter of 2024.

Speaker #5: For . Aside from this strong AI glasses , revenue also contributed to revenue growth in Q3 . Moving now to our consolidated results .

Susan Li: Aside from this, strong Ray-Ban Meta AI glasses revenue also contributed to revenue growth in Q3. Moving now to our consolidated results, Q3 total revenue was $51.2 billion, up 26% or 25% on a constant currency basis. Q3 total expenses were $30.7 billion, up 32% compared to last year. Year over year expense growth accelerated 20 percentage points from Q2 due primarily to three factors. First, legal related expense growth was higher than in Q2 due to charges we recorded in the third quarter as well as us lapping a period of accrual reversals in the third quarter a year ago. Second, employee compensation growth accelerated driven by technical hires, particularly AI talent. Finally, growth in infrastructure costs accelerated due to increased infrastructure operating costs associated with our expanded data center fleet, depreciation on our incremental CapEx spend, and third party cloud spend.

Our tax rate would have been 14% excluding this charge.

Although the transition to the new U S tax law resulted in an accounting charge in the third quarter. We continue to expect we will recognize significant cash tax savings for the remainder of the current year and future years under the new law and this quarters charge reflects the total expected impact from the transition to the new U S tax law.

Speaker #5: Q3 total revenue was $51.2 billion , up 26% , or 25% , on a constant currency basis . Q3 total expenses were $30.7 billion , up 32% compared to last year .

Speaker #5: Year over year expense growth accelerated 20 percentage points from Q2 , due primarily to three factors . First , legal related expense growth was higher than in Q2 due to charges we as well as us lapping a period of accrual reversals in the third quarter .

Net income was $2 $7 billion or a dollar and five cents per share. Excluding the one time tax charge, our net income and EPS would have been $18 $6 billion and $7 25 per share respectively.

Speaker #5: A year ago . Second , employee compensation growth accelerated , driven by technical hires , particularly AI talent . Finally , growth in infrastructure costs accelerated due to increased infrastructure operating costs associated with our expanded data center fleet .

Yes.

Capital expenditures, including principal payments on finance leases were $19 $4 billion driven by investments in servers data centers and network infrastructure.

Free cash flow was $10 $6 billion, we repurchased $3 $2 billion of our class a common stock and paid $1 $3 billion in dividends to shareholders.

Speaker #5: Depreciation on our incremental CapEx spend and third party cloud spend , we ended Q3 with over 78,400 employees , up 8% year over year , driven by hiring and priority areas of monetization infrastructure .

Susan Li: We ended Q3 with over 78,400 employees, up 8% year over year, driven by hiring in priority areas of monetization, infrastructure, Reality Labs, Meta Superintelligence Labs, as well as regulation and compliance. Third quarter operating income was $20.5 billion, representing a 40% operating margin. Q3 interest and other income was $1.1 billion, driven primarily by unrealized gains on our marketable equity securities. Our tax rate for the quarter was 87%, which was unfavorably impacted by a one time non cash reduction in deferred tax assets that we no longer anticipate using under new U.S. tax law. Our tax rate would have been 14% excluding this charge. Although the transition to the new U.S.

We ended the quarter with $44.4 billion in cash and marketable securities and $28 $8 billion in debt.

Speaker #5: Reality labs meta third quarter , , Superintelligence Labs , as well as regulation and compliance . Third quarter operating income was $20.5 billion , representing a 40% operating margin .

Turning now to the business outlook. There are two primary factors that drive our revenue performance, our ability to deliver engaging experiences for our community and our effectiveness at monetizing that engagement over time.

Speaker #5: Q3 interest and other income was $1.1 billion , driven primarily by unrealized gains on our marketable equity . Our tax rate for the quarter was 87% , which was unfavorably impacted by a one time non-cash reduction in deferred tax assets that we no longer anticipate using under new US tax law .

On the first daily Actives continue to grow year over year across Facebook Instagram and Whatsapp.

We're continuing to see improvements to our products and recommendations drive incremental engagement with year over year growth in global time spend accelerating on both Facebook and Instagram in Q3.

In the U S. Overall time spent on Facebook and Instagram grew double digits year over year, driven by continued video strength as well as healthy growth in non video time on Facebook.

Speaker #5: Our tax rate would have been 14% . Excluding this charge , although the transition to the new US tax law resulted in an accounting charge in the third quarter , we continue to expect we will recognize significant cash tax savings for the remainder of the current year , and future years .

Susan Li: tax law resulted in an accounting charge in the third quarter, we continue to expect we will recognize significant cash tax savings for the remainder of the current year and future years under the new law, and this quarter's charge reflects the total expected impact from the transition to the new U.S. tax law. Net income was $2.7 billion, or $1.05 per share. Excluding the one time tax charge, our net income and EPS would have been $18.6 billion and $7.25 per share, respectively. Capital expenditures including principal payments on finance leases were $19.4 billion, driven by investments in servers, data centers, and network infrastructure. Free cash flow was $10.6 billion. We repurchased $3.2 billion of our Class A common stock and paid $1.3 billion in dividends to shareholders. We ended the quarter with $44.4 billion in cash and marketable securities and $28.8 billion in debt.

The engagement games continue to be driven by product work and ongoing improvements to our recommendation system as we optimize our model architectures implement advanced modeling techniques and integrate more signals about people's interests.

Speaker #5: Under the new law, this quarter's charge reflects the total expected impact from the transition to the new U.S. tax law. Net income was $2.7 billion, or $1.05 per share.

We also continue to focus on increasing the freshness of recommended content.

On Facebook our systems are now surfacing twice as many wheels published that day than at the start of the year.

Speaker #5: Excluding the one time tax charge , our net income and EPs would have been $18.6 billion and $7.25 per share , respectively . Capital expenditures , including principal finance leases , were $19.4 billion , driven by investments in servers , data centers and network infrastructure .

Looking to 2026, we expect to advance our recommendation systems across several dimensions on.

On Instagram, one focus is evolving our systems to surface content across a broader set of topics that cater to the diverse interests of each person.

This follows a similar approach we've implemented on Facebook that has driven good results.

Speaker #5: Free cash flow was $10.6 billion . We repurchased $3.2 billion of our class A common stock and paid $1.3 billion in shareholders . We ended the quarter with $44.4 billion in cash and marketable securities , and $28.8 billion in debt .

We also expect to make significant progress on our longer term ranking innovations in 2026, we're seeing promising new results from our research efforts to create foundational ranking models and expect the new model innovations. We're developing as part of this will enable us to significantly scale up the amount of data and compute.

We used to train our recommendation models in 2026, yielding more relevant recommendations.

Speaker #5: Turning now to the business outlook. There are two primary factors that drive our revenue performance: our ability to deliver engaging experiences for our community and our effectiveness at monetizing that engagement over time.

Susan Li: Turning now to the business outlook, there are two primary factors that drive our revenue performance: our ability to deliver engaging experiences for our community and our effectiveness at monetizing that engagement over time. On the first, daily actives continue to grow year over year across Facebook, Instagram, and WhatsApp. We're continuing to see improvements to our products and recommendations drive incremental engagement, with year over year growth in global time spent accelerating on both Facebook and Instagram in Q3. In the U.S., overall time spent on Facebook and Instagram grew double digits year over year, driven by continued video strength as well as healthy growth in non-video time on Facebook. The engagement gains continue to be driven by product work and ongoing improvements to our recommendation systems as we optimize our model architectures, implement advanced modeling techniques, and integrate more signals about people's interests.

Another large focus next year is leveraging yellow lands to improve content understanding. We expect this is going to enable our systems to more precisely label, the keywords and topics within videos and posts, which will allow our systems to both develop deeper intuition about a person's interests and retrieve the content that matches.

Speaker #5: On the first daily actives continue to grow year over year across Facebook , Instagram and WhatsApp . We're continuing to see improvements to our products and recommendations drive incremental engagement with year over year growth in global time spent accelerating on both Facebook and Instagram in Q3 .

Finally, we're making good progress with meta AI and threats the number of people using meta AI across our family of apps continues to grow and we're increasingly leveraging first party content into meta AI results with the majority of men a i's responses to Facebook deep dive queries in the U S now showing related wheels.

Speaker #5: In the US . Overall , time spent on Facebook and Instagram grew double digits year over year , driven by continued video strength as well as healthy growth in Non-video time on Facebook .

Speaker #5: The engagement gains continue to be driven by product work and ongoing improvements to our recommendation systems . As we optimize our model architectures , implement advanced modeling techniques , and integrate more signals about people's interests .

We're also seeing a lot of traction with media generation.

People have created over 20 billion images using our products.

And since launching vibes within meta AI in September we've seen media generation in the App increased more than tenfold.

Speaker #5: We also continue to focus on increasing the freshness of recommended content on Facebook . Our systems are now surfacing twice as many Reels published that day than at the start of the year .

Susan Li: We also continue to focus on increasing the freshness of recommended content on Facebook. Our systems are now surfacing twice as many Reels published that day than at the start of the year. Looking to 2026, we expect to advance our recommendation systems across several dimensions. On Instagram, one focus is evolving our systems to surface content across a broader set of topics that cater to the diverse interests of each person. This follows a similar approach we've implemented on Facebook that has driven good results. We also expect to make significant progress on our longer term ranking innovations in 2026.

On threads, we see strong growth in both daily actives and the depth of engagement as we continue to improve recommendations.

The ranking optimizations, we made in Q3 alone drove a 10% increase in time spent on threats.

Speaker #5: Looking to 2026 , we expect to advance our recommendation systems across several dimensions on Instagram . One . Focus is evolving our systems to surface content across a broader set of topics that cater to the diverse interests of each person .

We also continue to ship new features including launching direct messaging in Q3, so anyone on threads can now message one another within the App.

Speaker #5: This follows a similar approach we've implemented on Facebook that has driven good results. We also expect to make significant progress on our longer-term ranking innovations in 2026.

Now to the second driver of our revenue performance increasing monetization efficiency.

The first part of this work is optimizing the level of ads within organic engagement.

Speaker #5: We're seeing promising new results from our research efforts to create foundational ranking models and expect the new model innovations we're developing as part of this will enable us to significantly scale up the amount of data and compute we use to train our recommendation models .

Susan Li: We're seeing promising new results from our research efforts to create foundational ranking models and expect the new model innovations we're developing as part of this will enable us to significantly scale up the amount of data and compute we use to train our recommendation models in 2026, yielding more relevant recommendations. Another large focus next year is leveraging LLMs to improve content understanding. We expect this is going to enable our systems to more precisely label the keywords and topics within videos and posts, which will allow our systems to both develop deeper intuition about a person's interests and retrieve the content that matches them. Finally, we're making good progress with Meta AI and Threads. The number of people using Meta AI across our family of apps continues to grow, and we're increasingly leveraging first party content into Meta AI results.

We continue to refine AD supply across each of our major surfaces within Facebook and Instagram to better deliver ads at the time and place they are most relevant to people.

Longer term, we have exciting AD supply opportunities on those threads and whatsapp status.

Speaker #5: In 2026 , yielding more relevant recommendations . Another large focus next year is leveraging LMS to improve content understanding . We expect this is going to enable our systems to more precisely label the keywords and topics within videos and posts , which will allow our systems to both develop deeper intuition about a person's interests and retrieve the content that matches them .

Ads are now running globally in feed on threads and we're following our typical monetization playbook of optimizing the ads formats and performance before we ramp supply.

Within Whatsapp status, we're continuing to gradually introduce ads and expect to complete the rollout next year.

The second part of increasing monetization efficiency is improving marketing performance.

Advancing our AD systems remains a critical aspect of this work and we are driving performance gains through ongoing improvements in our larger scale ads ranking models.

Speaker #5: Finally , we're making good progress with meta AI and threads the number of people using meta AI across our family of apps continues to grow , and we're increasingly leveraging first party content into meta AI results with the majority of meta AI's responses to Facebook's deep dive queries in the US now showing related Reels .

For example, we continue to broaden the adoption of flattish our unified model architecture.

Susan Li: With the majority of Meta AI's responses to Facebook deep dive queries in the U.S. now showing related Reels, we're also seeing a lot of traction with media generation. People have created over 20 billion images using our products, and since launching Vibes within Meta AI in September, we've seen media generation in the app increase more than tenfold on Threads. We see strong growth in both daily actives and the depth of engagement as we continue to improve recommendations. The ranking optimizations we made in Q3 alone drove a 10% increase in time spent on Threads. We also continue to ship new features, including launching direct messaging in Q3, so anyone on Threads can now message one another within the app. Now to the second driver of our revenue performance, increasing monetization efficiency. The first part of this work is optimizing the level of ads within organic engagement.

In Q3, we rolled out latest to App ads, which drove a nearly 3% gain in conversions for that objective.

Speaker #5: We're also seeing a lot of traction with media generation. People have created over 20 billion images using our products, and since launching Vibes within Meta AI in September, we've seen media generation in the app increase more than tenfold. On Threads, we see strong growth in both daily actives and the depth of engagement.

Since introducing let us back in 2023, along with other back end improvements we have now cut the number of ads ranking and recommendation models by approximately 100, as we consolidated smaller and more specialized models into larger ones that use the latest architecture to generalize learnings across surfaces and objectives.

Speaker #5: As we continue to improve recommendations, the ranking optimizations we made in Q3 alone drove a 10% increase in time spent on threads.

We continue to observe performance improvements as we combine models and expect to drive additional gains as we consolidate another 200 miles over the coming years into a smaller number of highly capable models.

Speaker #5: We also continue to ship new features, including launching direct messaging in Q3. So anyone on Threads can now message one another within the app.

In addition to advancing our foundational adds models, we're innovating on a run time models, we used downstream of them for ads in France for.

Speaker #5: Now to the second driver of our revenue performance . Increasing monetization efficiency . The first part of this work is optimizing the level of ads within organic engagement .

For example, we began piloting a new runtime ads ranking model in Q3 that leverages more compute and data than our prior models to select more relevant ads.

Speaker #5: We continue to refine ad supply across each of our major surfaces within Facebook and Instagram to better deliver ads . At the time and place they are most relevant to people .

Susan Li: We continue to refine ad supply across each of our major surfaces within Facebook and Instagram to better deliver ads at the time and place they are most relevant to people. Longer term, we have exciting ad supply opportunities on both Threads and WhatsApp Status. Status ads are now running globally in feed on Threads, and we're following our typical monetization playbook of optimizing the ads formats and performance before we ramp supply within WhatsApp Status. We're continuing to gradually introduce ads and expect to complete the rollout next year. The second part of increasing monetization efficiency is improving marketing performance. Advancing our ad systems remains a critical aspect of this work, and we are driving performance gains through ongoing improvements in our larger scale ad ranking models. For example, we continue to broaden the adoption of Lattice, our unified model architecture.

And testing we've seen this new model drive a more than 2% lift in conversions on Instagram.

Speaker #5: Longer term , we have exciting ad supply opportunities on both threads and WhatsApp status . Ads are now running globally in feed on threads , and we're following our typical monetization playbook of optimizing the ads , formats and performance before we ramp supply .

We also significantly improved performance of Andromeda in Q3 by combining models across retrieval and early stage ranking into a single model driving a 14% increase in ads quality on Facebook surfaces.

Within our ads products, we're seeing continued momentum with advantaged plus in Q3, we completed the rollout of our streamlined campaign creation flow for advantage plus lead campaigns. So now advertisers running sales app or lead campaigns have end to end automation turned on from the beginning allowing our systems to look at.

Speaker #5: Within WhatsApp status , we're continuing to gradually introduce ads and expect to complete the rollout next year . The second part of increasing monetization efficiency is improving marketing performance , advancing our ad systems remains a critical aspect of this work , and we are driving performance gains through ongoing improvements in our larger scale ads ranking models .

Across our platform to optimize performance by automatically choosing criteria like who does show the adds to and where to show them.

Speaker #5: For example , we continue to broaden the adoption of lattice , our unified model architecture . In Q3 , we rolled out lattice to app ads , which drove a nearly 3% gain in conversions .

The annual run rate of revenue running through our end to end automated solutions has now reached $60 billion. Following the implementation of the new streamlined creation flow as we continue to see more advertisers leverage the performance benefits of our solutions.

Susan Li: In Q3, we rolled out Lattice to app ads, which drove a nearly 3% gain in conversions for that objective. Since introducing Lattice back in 2023 along with other back end improvements, we have now cut the number of ad ranking and recommendation models by approximately 100 as we consolidated smaller and more specialized models into larger ones that use the Lattice architecture to generalize learnings across surfaces and objectives. We continue to observe performance improvements as we combine models and expect to drive additional gains as we consolidate another 200 models over the coming years into a smaller number of highly capable models. In addition to advancing our foundational ads models, we're innovating on our runtime models we use downstream of them for ads inference.

Speaker #5: For that objective . Since introducing lattice back in 2023 , along with other back end improvements , we have now cut the number of ads ranking in recommendation models by approximately 100 .

Within our advantage plus creative suite, the number of advertisers using at least one of our video generation features was up 20% versus the prior quarter as adoption of image animation and video expansion continues to scale.

Speaker #5: As we consolidated smaller and more specialized models into larger ones that use the lattice architecture to generalize learnings across surfaces and objectives, we continue to observe performance improvements as we combine models. We expect to drive additional gains as we consolidate another 200 models over the coming years into a smaller number of highly capable models.

We've also added more generative AI features to make it easier for advertisers to optimize their AD creatives and drive increased performance.

In Q3, we introduced AI generated music. So advertisers can have music generated for their ads that aligns with the tone and message of the creative.

Speaker #5: In addition to advancing our foundational ads models , we're innovating on our run models . We use downstream of them for ads , inference .

Finally business messaging remains a significant opportunity for us.

Speaker #5: For example , we began piloting a new runtime Ads ranking model in Q3 that leverages more compute and data than our prior models to select more relevant ads .

Susan Li: For example, we began piloting a new runtime ads ranking model in Q3 that leverages more compute and data than our prior models to select more relevant ads. In testing, we've seen this new model drive a more than 2% lift in conversions on Instagram. We also significantly improved performance of Andromeda in Q3 by combining models across retrieval and early stage ranking into a single model, driving a 14% increase in ads quality on Facebook surfaces. Within our ads products, we're seeing continued momentum with Advantage+. In Q3, we completed the rollout of our streamlined campaign creation flow for Advantage+ lead campaigns. Now advertisers running sales, app, or lead campaigns have end-to-end automation turned on from the beginning, allowing our systems to look across our platform to optimize performance by automatically choosing criteria like who to show the ads to and where to show them.

We're seeing strong growth across our portfolio of solutions, including with click to Whatsapp ads, which grew revenue 60% year over year in Q3.

Speaker #5: In testing , we've seen this new model drive a more than 2% lift in conversions on Instagram . We also significantly improved performance of Andromeda in Q3 by combining models across retrieval and early stage ranking into a single model .

We're also making good progress on our business AI efforts, where we've been focused on building a turnkey AI that helps businesses generate leads and drive sales we.

We've been opening access in recent months to more businesses within our initial test markets, the Philippines, and Mexico and have seen strong usage with millions of conversations between people and business AI is taking place since July.

Speaker #5: Driving a 14% increase in Ads quality on Facebook surfaces within our ads products , we're seeing continued momentum with Advantage+ in Q3 , we completed the rollout of our streamlined campaign Creation Flow for Advantage+ lead campaigns .

This month, we expanded availability within whatsapp and messenger to all eligible businesses in Mexico, and the Philippines, respectively.

Speaker #5: So now advertisers running sales app or lead campaigns have end to end automation turned on from the beginning , allowing our systems to look across our platform to optimize performance by automatically choosing criteria like who to show the ads to and where to show them .

In the U S. We're also starting to roll out the ability for merchants to add their business AI to their website. So we can support the full sale funnel from AD to purchase.

Next I would like to discuss our approach to capital allocation.

Speaker #5: The annual run rate of revenue running through our end-to-end automated solutions has now reached $60 billion, following the implementation of the new streamlined Creation flow.

Our primary focus is deploying capital to support the company's highest order priorities, including developing leading AI products models and business solutions.

Susan Li: The annual run rate of revenue running through our end-to-end automated solutions has now reached $60 billion following the implementation of the new streamlined creation flow as we continue to see more advertisers leverage the performance benefits of our solutions. Within our Advantage+ creative suite, the number of advertisers using at least one of our video generation features was up 20% versus the prior quarter as adoption of image, animation, and video expansion continues to scale. We've also added more generative AI features to make it easier for advertisers to optimize their ad creatives and drive increased performance. In Q3, we introduced AI-generated music so advertisers can have music generated for their ad that aligns with the tone and message of the creative. Finally, business messaging remains a significant opportunity for us.

Speaker #5: As we continue to see more advertisers leverage the performance benefits of our solutions within our Advantage+ Creative Suite, the number of advertisers using at least one of our video generation features was up 20% versus the prior quarter.

As we make significant investments in infrastructure to support. This work we are focused on preserving maximum long term flexibility to ensure we can meet our future capacity needs, while also being able to respond to how the market develops in the years ahead.

Speaker #5: As adoption of image, animation, and video expansion continues to scale, we've also added more generative AI features to make it easier for advertisers to optimize their ad creatives and drive increased performance.

We're doing so in several ways, including staging data center sites. So we can spring up capacity quickly in future years as we need it.

As well as establishing strategic partnerships that gives us option value for future compute needs.

The strong financial position and cash generation of our business enable us to make these investments while also accessing additional pools of cost efficient capital.

Speaker #5: In Q3, we introduced AI-generated music, so advertisers can have music generated for their ad that aligns with the tone and message of the creative.

Speaker #5: Finally , business messaging remains a significant opportunity for . We're seeing strong growth across our portfolio of solutions , including with click to WhatsApp ads , which grew revenue 60% year over year in Q3 .

Moving to our financial outlook, we expect fourth quarter 2025, total revenue to be in the range of $56 billion to $59 billion.

Susan Li: We're seeing strong growth across our portfolio of solutions, including with Click-to-Messaging ads to WhatsApp, which grew revenue 60% year over year in Q3. We're also making good progress on our business AI efforts where we've been focused on building a turnkey AI that helps businesses generate leads and drive sales. We've been opening access in recent months to more businesses within our initial test markets, the Philippines and Mexico, and have seen strong usage with millions of conversations between people and business AIs taking place since July. This month we expanded availability within WhatsApp and Messenger to all eligible businesses in Mexico and the Philippines respectively. In the U.S. we're also starting to roll out the ability for merchants to add their business AIs to their website so we can support the full sale funnel from ad to purchase.

Our guidance assumes foreign currency is an approximately 1% tailwind to year over year total revenue growth based on current exchange rates.

Speaker #5: We're also making good progress on our business AI efforts, where we've been focused on building a turnkey AI that helps businesses generate leads and drive sales.

Our outlook reflects an expectation for continued strong AD revenue growth, partially offset by lower year over year reality labs revenue in Q4.

Speaker #5: We've been opening access in recent months to more businesses within our initial test markets . The Philippines and Mexico , and have seen strong usage with millions of conversations between people and businesses taking place since July .

Speaker #5: We've been us starting to roll out the ability for merchants to add their business eyes to their website . So we can support the full sale funnel from AD to purchase .

The anticipated reduction in reality labs revenue is due to us lapping the introduction of quest three yes in Q4 of last year as well as retail partners procuring quest headsets. During Q3 of this year to prepare for the holiday season.

Which were recorded as revenue in the third quarter.

Turning to the expense and Capex outlooks I'll first start with 2025 before providing some commentary on our planning for 2026.

Speaker #5: Next , I would like to discuss our approach to capital allocation . Our primary focus is deploying capital to support the company's highest order priorities , including developing , leading AI products , models and business solutions .

Susan Li: Next, I would like to discuss our approach to capital allocation. Our primary focus is deploying capital to support the company's highest order priorities, including developing leading AI products, models, and business solutions. As we make significant investments in infrastructure to support this work, we are focused on preserving maximum long-term flexibility to ensure we can meet our future capacity needs while also being able to respond to how the market develops in the years ahead. We're doing so in several ways, including staging data center sites so we can spring up capacity quickly in future years as we need it, as well as establishing strategic partnerships that give us option value for future compute needs. The strong financial position and cash generation of our business enable us to make these investments while also accessing additional pools of cost-efficient capital.

We expect full year 2025 total expenses to be in the range of $116 billion to $118 billion updated from our prior outlook of $114 billion to $119 billion, and reflecting a growth rate of 22% to 24% year over year.

Speaker #5: As we make significant investments in infrastructure to support this work, we are focused on preserving maximum long-term flexibility to ensure we can meet our future capacity needs while also being able to respond to how the market develops in the years ahead.

We currently expect 2025 capital expenditures, including principal payments on finance leases to be in the range of $70 billion to $72 billion increase from our prior outlook of $66 billion to $72 billion.

Speaker #5: We're doing so in several ways , including staging , data center sites so we can spring up capacity quickly in future years as we need it , as well as establishing strategic partnerships that give us option value for future compute needs .

Onto tax absent any changes to our tax landscape, we expect our fourth quarter 'twenty 'twenty five tax rate to be 12% to 15%.

Speaker #5: The strong financial position and cash generation of our business enable us to make these investments , while also accessing additional pools of cost efficient capital .

Turning now to 2026.

We're at an exciting point for our company, where we have continued runway to improve our core services today as well as the opportunity to build new AI powered experiences and services that will transform how people engage with our products in the future.

Susan Li: Moving to our financial outlook, we expect fourth quarter 2025 total revenue to be in the range of $56 to $59 billion. Our guidance assumes foreign currency is an approximately 1% tailwind to year-over-year total revenue growth based on current exchange rates. Our outlook reflects an expectation for continued strong ad revenue growth, partially offset by lower year-over-year Reality Labs revenue in Q4. The anticipated reduction in Reality Labs revenue is due to us lapping the introduction of Quest 3S in Q4 of last year, as well as retail partners procuring Quest headsets during Q3 of this year to prepare for the holiday season, which were recorded as revenue in the third quarter. Turning to the expense and CapEx outlooks, I'll first start with 2025 before providing some commentary on our planning for 2026.

Speaker #5: Moving to our financial outlook , we expect fourth quarter 2025 total revenue to be in the range of 56 to $59 billion . Our guidance assumes foreign currency is an approximately 1% tailwind to year over year total revenue growth .

We expect this set of investments, we're making within our ads and organic engagement initiatives next year will enable us to continue to deliver strong revenue growth in 2026, while our progress on AI models and products will position us to capitalize on new revenue opportunities in the years to come.

Speaker #5: Based on current exchange rates , our outlook reflects an expectation for continued strong ad revenue growth , partially offset by lower year over year Reality Labs revenue in Q4 .

A central requirement to realizing these opportunities is infrastructure capacity.

Speaker #5: The anticipated reduction in Reality Labs revenue is due to us lapping the introduction of quest three in Q4 of last year , as well as retail partners procuring quest during Q3 of this year to prepare for the holiday season , which were recorded as revenue in the third quarter .

We have begun to plan for next year, it's become clear that our compute needs have continued to expand meaningfully including versus our own expectations last quarter.

We're still working through our capacity plans for next year, but we expect to invest aggressively to meet these needs both by building our own infrastructure and contracting with third party cloud providers. We anticipate this will provide further upward pressure on our capex and expense plans next year.

Speaker #5: Turning to the expense and CapEx outlooks . I'll first start with 2025 before providing some commentary on our planning for 2026 . We expect full year 2025 total expenses to be in the range of 116 to $118 billion .

Susan Li: We expect full year 2025 total expenses to be in the range of $116 to $118 billion, updated from our prior outlook of $114 to $118 billion and reflecting a growth rate of 22% to 24% year-over-year. We currently expect 2025 capital expenditures, including principal payments on finance leases, to be in the range of $70 to $72 billion, increased from our prior outlook of $66 to $72 billion. Onto tax, absent any changes to our tax landscape, we expect our fourth quarter 2025 tax rate to be 12% to 15%. Turning now to 2026, we are at an exciting point for our company where we have continued runway to improve our core services today as well as the opportunity to build new AI powered experiences and services that will transform how people engage with our products in the future.

As a result, our current expectation is that Capex dollar growth will be notably larger in 2026 and 2025.

Speaker #5: Updated from our prior outlook of 114 to $118 billion , and reflecting a growth rate of 22 to 24% year over year . We currently expect 2025 capital expenditures , including principal payments on finance leases , to be in the range of 70 to $72 billion , increased from our prior outlook of 66 to $72 billion .

We also anticipate total expenses will grow at a significantly faster percentage rate and 2026, and 2025 with growth, primarily driven by infrastructure costs, including incremental cloud expenses and depreciation.

Employee compensation costs will be the second largest contributor to growth.

Speaker #5: On to tax . changes to our tax landscape , we expect our fourth quarter 2025 tax rate to be 12 to 15% . Turning now to 2026 , we are at an exciting point for our company where we have continued runway to Absent any improve our core services today , as well as the opportunity to build new AI powered experiences and services that will transform how people engage with our products in the future .

As we recognize a full year of compensation for employees hired throughout 2025, particularly AI talent and add technical talent and priority areas.

Finally, we continue to monitor active legal and regulatory matters, including the increasing headwinds in the EU and the U S that could significantly impact our business and financial results.

For example in the EU, we continue to engage constructively with the European Commission on our less personalized ads offering.

Speaker #5: We expect this set of investments we're making within our ads and organic engagement initiatives . Next year will enable us to continue to deliver strong revenue growth in 2026 , while our progress on AI models and products will position us to capitalize on new revenue opportunities in the years to come .

Susan Li: We expect the set of investments we're making within our ads and organic engagement initiatives next year will enable us to continue to deliver strong revenue growth in 2026, while our progress on AI models and products will position us to capitalize on new revenue opportunities in the years to come. A central requirement to realizing these opportunities is infrastructure capacity. As we have begun to plan for next year, it's become clear that our compute needs have continued to expand meaningfully, including versus our own expectations last quarter. We are still working through our capacity plans for next year, but we expect to invest aggressively to meet these needs both by building our own infrastructure and contracting with third party cloud providers. We anticipate this will provide further upward pressure on our CapEx and expense plans next year.

However, we cannot rule out the commission imposing further changes to that offering that could have a significant negative impact on our European revenue as early as this quarter.

In the U S. A number of youth related trials are scheduled for 2026 and May ultimately result in a material loss.

Speaker #5: A central requirement to realizing these opportunities is infrastructure capacity. As we have begun to plan for next year, it's become clear that our compute needs have continued to expand meaningfully, including versus our own expectations.

In closing this was another good quarter for our business, we have an exciting set of opportunities to continue improving our core business, while delivering innovative new experiences and services for the people and businesses using our products in the years to come.

Speaker #5: Last quarter. We are still working through our capacity plans for next year, but we expect to invest to meet these needs, both by building our own infrastructure and contracting with third-party cloud providers.

With that Crystal, let's open up the call for questions.

Thank you we will now open the lines for a question and answer session to ask a question. Please press star one on your Touchtone phone you withdraw your question again press Star one please limit yourself to one question. Please pickup your handset before asking your question to ensure clarity if you are streaming.

Speaker #5: We anticipate this will provide further upward pressure on our CapEx and expense plans next year. As a result, our current expectation is that CapEx dollar growth will be notably larger in 2026 than in 2025.

Susan Li: As a result, our current expectation is that CapEx dollar growth will be notably larger in 2026 than 2025. We also anticipate total expenses will grow at a significantly faster percentage rate in 2026 than 2025, with growth primarily driven by infrastructure costs including incremental cloud expenses and depreciation. Employee compensation costs will be the second largest contributor to growth as we recognize a full year of compensation for employees hired throughout 2025, particularly AI talent and technical talent in priority areas. Finally, we continue to monitor active legal and regulatory matters, including the increasing headwinds in the EU and the U.S. that could significantly impact our business and financial results. For example, in the EU we continue to engage constructively with the European Commission on our less personalized ads offering.

Speaker #5: We also anticipate total expenses will grow at a significantly faster percentage rate in 2026 than 2025 , with growth primarily driven by infrastructure costs , including incremental cloud expenses and depreciation .

Days call. Please mute your computer speakers.

And your first question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Thanks for taking my questions I have a two for Susan the first one Susan so the pipeline for for core improvements to come in 'twenty, six with models and AD ranking models and more types of compute it seems very exciting in the the infrastructure bill it seems sizable behind that.

Speaker #5: Employee compensation costs will be the second largest contributor to growth as we recognize a full year of compensation for employees hired throughout 2025 , particularly AI talent and ad technical talent in priority areas .

Can you help us a little I understand some of the early quantifiable signals, you're seeing on a b tests from some of these improvements to come that sort of makes you. Most excited and gives you confidence you're going to get Roissy from all this capex. That's the first one second one is a little faster how how large is the reality.

Speaker #5: Finally , we continue to monitor active , legal and regulatory matters , including the increasing headwinds in the EU and the US that could significantly impact our business and financial results .

Speaker #5: For example , in the EU , we continue to engage constructively with the European Commission on our less personalized ads offering . However , we cannot rule out the Commission imposing further changes to that offering that could have a significant negative impact on our European revenue .

Audi labs revenue headwind in the <unk> guidance.

[laughter].

Susan Li: However, we cannot rule out the Commission imposing further changes to that offering that could have a significant negative impact on our European revenue as early as this quarter. In the U.S., a number of youth related trials are scheduled for 2026 and may ultimately result in a material loss. In closing, this was another good quarter for our business. We have an exciting set of opportunities to continue improving our core business while delivering innovative new experiences and services for the people and businesses using our products in the years to come. With that, Krista, let's open up the call for questions. Thank you. We will now open the lines for a question and answer session. To ask a question, please press Star one on your touchtone phone. To withdraw your question again, press Star one. Please limit yourself to one question.

Thanks, Brian for the question.

I think your first question had a couple of parts to it so I'm I'm going to try to disaggregate those parts and let me know if this if this addresses what you're getting to.

Speaker #5: As early as this quarter in the US , a number of youth related trials are scheduled for 2026 and may ultimately result in a material loss .

I will say that the growth in 2026 Capex relative to 2025 comes from growth in each of the core areas M. S. L. A core AI as well as non AI spend so all of those areas are growing but these M. S. L. A I needs are growing the most.

Speaker #5: In closing . This was another good quarter for our business . We have an exciting set of opportunities to continue improving our core business while delivering innovative new experiences and services for the people and businesses using our products .

In terms of the core AI pipeline, you know I think we talked about last year. When we were going into the 2025 budget process. We had a roadmap of resource investments across both head count and compute that we thought would pay off you know in 2026, and it's really a very broad range of sort of differ.

Speaker #5: In the years to come . With that , Krista , let's open up the call for questions .

Speaker #2: Thank you . We will now open the lines for a question and answer session . To ask a question , please press star one on your touch tone phone .

Speaker #2: To withdraw your question again, press star one. Please limit yourself to one question. Please pick up your handset before asking your question to ensure clarity.

As ranking and performance our efforts.

Susan Li: Please pick up your handset before asking your question to ensure clarity. If you are streaming today's call, please mute your computer speakers and your first question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

And we're continuing to see that you know those have paid off through the course of the year.

Speaker #2: If you are streaming today's call , please mute your computer speakers . And your first question comes from the line of Brian Nowak with Morgan Stanley .

There is for a long list of specific efforts, but one of the measures that we look at to monitor. This as is you know how are we driving outperformance how our conversions growing conversion does a complex metric for us because advertisers are optimized for so many different conversions.

Speaker #2: Please go ahead .

Speaker #6: Thanks for taking my questions . I have a two for for Susan . The first one , Susan . So the pipeline for for core improvements to come in 26 with models and ad ranking models and more types of compute seems very exciting .

Kenneth Dorell: Thanks for taking my questions. I have two for Susan. The first one, Susan, the pipeline for core improvements to come in 2026 with models and ad ranking models and more types of compute seems very exciting, and the infrastructure build seems sizable behind that. Can you help us a little, understand some of the early quantifiable signals you're seeing on A/B tests from some of these improvements to come that sort of make you most excited and give you confidence going to get ROIC from all this CapEx? That's the first one. Second one's a little faster. How large is the Reality Labs revenue headwind in the Q4 guidance? Thanks.

On different values, but when we control for that and look at value weighted conversion rates, we're seeing very strong year over year growth and conversions can weighted conversions continue to grow faster.

Speaker #6: And the the infrastructure build seems sizable behind that . So can you help us a little understand some of the early quantifiable signals you're seeing on AB tests from some of these improvements to come that sort of make you most excited and give you confidence you're going to get ROIC from all this CapEx .

Then then impressions, we also talked about some of the new model architecture over the course of the year and the degree to which the new model architecture is enabling US also to take advantage of having more data and more compute to drive that performance. So we expect that that's going to be a continued story in 2026.

Speaker #6: That's the first one . Second one's a little faster . How how large is the reality ? Labs revenue headwind in the for ?

We are in fact at the beginning of our 2026 budgeting process now and we see a similar list of of revenue investments.

Speaker #6: Q guidance . Thanks .

Speaker #5: Thanks , Brian , for the question . I think your first question had a couple parts to it . So I'm going to try to disaggregate those parts and let me know if this if this addresses what you're getting to .

Susan Li: Thanks, Brian, for the question. I think your first question had a couple parts to it, so I'm going to try to disaggregate those parts and let me know if this addresses what you're getting to. I will say that the growth in 2026 CapEx relative to 2025 comes from growth in each of the core areas, MSL core AI as well as non-AI spend. All of those areas are growing, but these MSL AI needs are growing the most in terms of the core AI pipeline. I think we talked about last year when we were going into the 2025 budget process, we had a roadmap of resource investments across both headcount and compute that we thought would pay off in 2026.

That we you know that we're excited to be able to invest in and so we think that that's going to be a big part of our ability to continue to drive strong revenue performance throughout the year.

Speaker #5: I will say that the growth in 2026 CapEx relative to 2025 comes from growth of the core areas . MSL core AI , as well as Non-ai spend .

Yeah.

On your second question, which is are the reality labs, the reality labs revenue headwind.

I don't think we have quantified the exact size of that.

Speaker #5: So all of those areas are growing , but the MSL AI needs are growing . The most in terms core AI pipeline . You know , I think we about last year when we were going into the 2025 budget process .

We expect that Q4 reality loves revenue will be lower than last year for a couple of reasons that I alluded to the biggest factor is we're lapping the introduction of quest three as in Q4 of last year, and we don't have a new headset in the market. This year. We also recorded all of our holiday related quest three as sales in Q4 24.

Speaker #5: We had a roadmap of resource investments across both headcount and compute that we thought would pay off in 2026 . it's really a very broad range of sort of different ads ranking and performance efforts .

Since the headset was launched in October 24. This year, we're recognizing some of those quest three as sales in Q3 as retail partners are procured quest headsets in advance of the holiday season.

Susan Li: It's really a very broad range of different ad ranking and performance efforts, and we're continuing to see that those have paid off through the course of the year. There is a long list of specific efforts, but one of the measures that we look at to monitor this is how are we driving ad performance, how are conversions growing. Conversions is a complex metric for us because advertisers optimize for so many different conversions on different values. When we control for that and look at value-weighted conversion rates, we're seeing very strong year-over-year growth, and weighted conversions continue to grow faster than impressions. We also talked about some of the new model architecture over the course of the year and the degree to which the new model architecture is enabling us also to take advantage of having more data and more compute to drive ad performance.

Speaker #5: And we're continuing to see that , you know , those have paid off through the course of the year . There is a long list of , of of specific efforts .

We're still expecting significant year over year growth in AI glasses revenue in Q4, as we benefit from strong demand for the recent products that we've introduced but that is more than offset by the headwinds to the quest headsets.

Speaker #5: But one of the measures that we look at to monitor this is , is , you know , how are we driving ad performance , how are conversions growing conversions is a complex metric for us because advertisers optimize for so many different conversions with different values .

Your next question comes from the line of Doug Anmuth with J P. Morgan. Please go ahead.

Speaker #5: But when we control for that and look at Valuated conversion rates , we're seeing strong year over year growth and conversions . Weighted conversions continue to grow faster than than impressions .

Great. Thanks for taking the question.

I appreciate the strategy to Frontload capacity for Super Intelligence can you just talk about your thought process and kind of triangulating. The capex dollar growth and significantly faster expense growth next year with core growth in the business and then the impact on earnings and free cash flow and do you have any.

Speaker #5: We also very talked about some of the new model architecture over the course of the year , and the degree to which the new model architecture is enabling us also to take advantage of having more data and more compute to drive ads .

Speaker #5: Performance . So we expect that that's going to be a continued story in 2026 . We are , in fact , at the beginning of our 2026 budgeting process now .

Targets that we should be thinking about for cash on hand, or net cash overall thanks.

Susan Li: We expect that that's going to be a continued story in 2026. We are in fact at the beginning of our 2026 budgeting process now, and we see a similar list of revenue investments that we're excited to be able to invest in. We think that that's going to be a big part of our ability to continue to drive strong revenue performance throughout the year. On your second question, which is the Reality Labs revenue headwind, I don't think we have quantified the exact size of that. We expect that Q4 Reality Labs revenue will be lower than last year for a couple reasons that I alluded to. The biggest factor is we're lapping the introduction of Quest 3S in Q4 of last year, and we don't have a new headset in the market this year. We also recorded all of our holiday-related Quest 3S sales in Q4 2024.

Yeah.

Speaker #5: And we see a similar list of of revenue investments that we , you know , that we're excited to be able to invest in .

Thanks, Doug.

We're right now I would say in the process of of where a relatively early actually still in the process of putting together our budget for 2026.

Speaker #5: And so we think that that's going to be a big part of our ability to continue to drive strong revenue performance throughout the year.

And it is on the on the capacity side, a particularly dynamic process. We're certainly seeing that we wish we had more capacity today than we do we would be able to put it towards good use certain not only with the MSL team appreciate having more capacity, but we'd be able to put it towards good and ROI positive use and the core <unk>.

Speaker #5: On your second question , which is the reality , labs , the Reality Labs revenue headwind , I don't think we have quantified the exact size of .

As well.

So we're really trying to plan ahead, not only to ensure that we have the capacity we need in 2026, but also to give ourselves the sort of flexibility and option value to have the capacity that we think we could meet in 27 and 28.

So that said you know there are lots of moving pieces in the budget, it's not baked yet it's still sort of in the process of coming together and we don't have specific targets to share.

Susan Li: Since the headset was launched on October 24, 2024, we're recognizing some of those Quest 3S sales in Q3 as retail partners have procured Quest headsets in advance of the holiday season. We're still expecting significant year-over-year growth in AI glasses revenue in Q4 as we benefit from strong demand for the recent products that we've introduced. That is more than offset by the headwinds to the Quest headsets. Your next question comes from the line of Douglas Anmuth with JPMorgan. Please go ahead.

But we do feel like you know our strategic priority is really making sure that we have the compute that we need to be well positioned to succeed at AI and you know that's that's sort of the foremost priority is we're putting together the budget.

Yeah, I mean, I'll I'll add a few thoughts on the steel though.

As Susan said, we're still working through the the actual budget and ethical.

Typically have more to share on that early next year.

Kenneth Dorell: Great. Thanks for taking the question. I appreciate the strategy to front load capacity for superintelligence. Can you just talk about your thought process in triangulating the CapEx dollar growth and the significantly faster expense growth next year with core growth in the business, and then the impact on earnings and free cash flow? Do you have targets that we should be thinking about for cash on hand or net cash overall? Thanks.

But <unk>.

To date, we keep on seeing this pattern.

Our rebuild.

Some amount of infrastructure to what we think is an aggressive assumption.

And then we keep on having more demand to be able to use more compute, especially in the core business and <unk>.

Ways that we think would be quite profitable then we end up having compute for so I.

I think that that suggests that being able to make a significantly larger investment here is very likely to be a profitable thing over over some period because if the primary use of it is going to be to accelerate the AI research and the new way I worked there were.

Susan Li: Thanks, Doug. We're right now, I would say, in the process of—we're relatively early actually still in the process of putting together our budget for 2026, and it is on the capacity side a particularly dynamic process. We're certainly seeing that we wish we had more capacity today than we do. We would be able to put it towards good use, certain. Not only would the MSL team appreciate having more capacity, but we'd be able to put it towards good and ROI positive use in the core business as well. We're really trying to plan ahead not only to ensure that we have the capacity we need in 2026, but also to give ourselves the sort of flexibility and option value to have the capacity that we think we could need in 2027 and 2028. That said, there are lots of moving pieces in the budget.

Doing and how that relates to both the core business and new products.

But any any computer we don't need for that.

We feel pretty good that we're going to be able to absorb a very large amount of that to just convert into more intelligence and better recommendations and our family of apps and ads in a profitable way.

No I mean, it's of course possible to overshoot that right and if we do I mean this is what I mentioned in my comments then.

We see that there's a.

Just a lot of demand for other new things that we'd build internally externally like almost every week people come to us from outside the company asking us to stand up an API service or asking me. If we have different compute that they could get from us and we haven't done that yet, but obviously if you got to a point, where you overbuilt you could you could have that as an option.

Susan Li: It's not baked yet. It's still sort of in the process of coming together. We don't have specific targets to share, but we do feel like our strategic priority is really making sure that we have the compute that we need to be well positioned to succeed at AI. That's sort of the foremost priority as we're putting together the budget.

And then you know that.

Kind of a very worst case would be that we effectively have just prebuilt for a couple of years in which case of course, there would be some loss in depreciation, but we'd grow into that and use it over time. So my view on this is that rather than continuing to be constrained on capex and feeling in the core business like we have significant investments that we can.

Yeah, I mean, I'll I'll add a few thoughts on this too although I'm in it.

Kenneth Dorell: Yeah, I mean, I'll add a few thoughts on this too. Although, as Susan said, we're still working through the actual budget and I think we'll typically have more to share on that early next year. To date, we keep on seeing this pattern where we build some amount of infrastructure to what we think is an aggressive assumption, and then we keep on having more demand to be able to use more compute, especially in the core business, in ways that we think would be quite profitable than we end up having compute for.

And said, where we're still working through the the actual budget and ethical.

Typically have more to share on that early next year.

But.

To date, we keep on seeing this pattern.

Make that were not able to make that would be profitable, but the right thing to do is to try to accelerate this to make sure that we have the compute that we need both for the AI research and new things that we're doing and to try to get to a different state on our compute stance on the core business. So that's kind of how I'm thinking about that overall.

We're rebuild.

Some amount of infrastructure to what we think is an aggressive assumption.

Then we keep on having more demand to be able to use more compute especially in the core business.

In ways that we think would be quite profitable then we end up having compute for so.

Of course, Theres, a lot of operational constraints to on what one can build right. So we're basically trying to work through this all in and I think we'll have more to.

Kenneth Dorell: I think that suggests that being able to make a significantly larger investment here is very likely to be a profitable thing over some period, because if the primary use of it is going to be to accelerate the AI research and the new AI work that we're doing and how that relates to both the core business and new products. Any compute that we don't need for that, we feel pretty good that we're going to be able to absorb a very large amount of that to just convert into more intelligence and better recommendations in our family of apps and ads in a profitable way now. It's of course possible to overshoot that. If we do, this is what I mentioned in my comments, then, you know, we see that there's just a lot of demand for other new things that we build internally, externally.

I think that that.

Suggests that being able to make a significantly larger investment here is very likely to be.

To share in the coming months and over the course of next year, but.

But I think there's just a huge huge amount of opportunities out here.

A profitable thing over.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Over some period.

The primary use of it is going to be to accelerate the AI research and the new way I work that we're doing and how that relates to both the core business and new products.

Thanks, So much for taking the question Mark wanted to reflect on some of your comments with respect to scaling towards Super intelligence and bringing it back to consumer.

But any any computer we don't need for that.

We feel pretty good that we're going to be able to absorb a very large amount of that to just convert.

Ah maybe reflect a little bit on the signals you've gotten on the way consumers across family of apps interact with meta AI today, and how you think about scaling and exiting models from the Super intelligence effort might change the utility and behavior around that AI in the years ahead.

Into more intelligence and better recommendations and our family of apps and ads in a profitable way.

No I mean, it's of course possible to overshoot that right and if we do I mean this is what I mentioned in my comments then.

Yeah I mean.

A lot of people use meta AI today, I mean as I said in my in my comments upfront, there's more than 1 billion people, who use it on a monthly basis and what we see is that as we improve the quality of the model primarily or for post training Lama for at this point. We are we continue to see improvements in usage.

We see that there's.

Just a lot of demand for other new things that we would build internally externally like almost every week people come to us from outside the company asking us to stand up an API service or asking if we have different compute that they could get from us and we haven't done that yet, but obviously if you got to a point, where you overbuilt you could you could have that as an option.

Kenneth Dorell: Almost every week, people come to us from outside the company asking us to stand up an API service or asking if we have different compute that they could get from us. We haven't done that yet. Obviously, if you got to a point where you overbuilt, you could have that as an option. The very worst case would be that we effectively have just prebuilt for a couple of years, in which case, of course, there would be some loss and depreciation, but we'd grow into that and use it over time.

So our view is that when we get the new models that we're building and M. S. L.

And then.

The kind of the very worst case would be that we effectively have just prebuilt for a couple of years in which case of course, there would be some loss in depreciation, but we'd grow into that and use it over time. So my view on this is that rather than continuing to be constrained on capex and feeling in the core business like we have significant investments that we have.

In there and get like truly frontier models with novel capabilities that you don't have another places then I forgot. This is just a massive latent opportunity, but we know I mean, I would guess that meta I think is the best track record of any company out there of taking a new product that people love and getting it to billions of people in.

Kenneth Dorell: My view on this is that rather than continuing to be constrained on CapEx and feeling in the core business like we have significant investments that we could make that we're not able to make that would be profitable, the right thing to do is to try to accelerate this, to make sure that we have the compute that we need both for the AI research and new things that we're doing, and to try to get to a different state on our compute stance on the core business. That's kind of how I'm thinking about that. Overall, of course, there's a lot of operational constraints too on what one can build, right. We're basically trying to work through this all, and I think we'll have more to share in the coming months and over the course of next year.

Could make that were not able to make that would be profitable, but the right thing to do is to try to accelerate this to make sure that we have the compute that we need both for the AI research and new things that we're doing and to try to get to a different state on our our compute stance on the core business. So that's kind of how I'm thinking about that overall.

Terms of a <unk>.

Usage, so I I think that the ability to plug in leading models is going to.

I would predict lead to a very large amount of use of these things over the coming years. So I'm I'm I'm very excited about that in terms of new new products. It's not just about AI as an assistant I think that theyre going to be all kinds of new products around different content formats, and we're starting to see that with with video and content creation backing up theres going be a lot more like that.

Of course, Theres, a lot of operational constraints to on what one can build right. So we're basically trying to work through this all in and I think we'll have more.

To share in the coming months and over the course of next year, but but.

Kenneth Dorell: I think that there's just a huge, huge amount of opportunities ahead here.

But I think that there's just a huge huge amount of opportunities out here.

I'm quite excited about.

And then there are the business versions of all these two like business AI and and then that's of course, one part of the story is the new things that will be possible to build and then the other part is how how a more intelligent models are just going to improve the core business and improve the recommendations that we make across the family of apps and improve.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Susan Li: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Kenneth Dorell: Thanks so much for taking the question, Mark. Wanted to reflect on some of your comments with respect to scaling towards superintelligence and bringing it back to consumer AI. Maybe reflect a little bit on the signals you've gotten on the way consumers across family of apps interact with Meta AI today and how you think about scaling and exiting models from the superintelligence effort might change the utility and behavior around Meta AI in the years ahead. Thanks. Yeah, I mean a lot of people use Meta AI today. As I said in my comments up front, there's more than a billion people who use it on a monthly basis. What we see is that as we improve the quality of the model, primarily for post-training Llama 4 at this point, we continue to see improvements in usage.

Thanks, So much for taking the question Mark wanted to reflect on some of your comments with respect to scaling towards Super intelligence and bringing it back to consumer.

And maybe reflect a little bit on the signals you've gotten on the way consumers across family of apps interact with meta AI today, and how you think about scaling and exiting models from the Super intelligence effort might change the utility and behavior around that AI in the years ahead.

The recommendations and advertising and I think there's just a you know as we've.

Showing there's sort of this very large amount of headroom in the opportunity there keeps growing as we are as we are improving and optimizing the AI there and I think that that really shows no sign of being near the end I think that there's quite a bit more to do there and like I said.

Yeah I mean.

A lot of people use meta AI today, I mean as I said in my in my comments upfront, there's more than 1 billion people, who use it on a monthly basis and what we see is that as we improve the quality of the model primarily or for post training Lama for at this point. We are we continue to see improvements in usage.

In response to the last question, we are sort of perennially operating.

The family of apps and ads business in our compute.

<unk> state at this point.

Which is on the on the one hand sort of an odd thing to say given the computer we built up but we really are taking a lot of the resources and using them to advance future things that we're doing and we think that there's a lot more compute that we could put towards the use that that would just unlocking.

So our view is that when we get the new models that we're building and M. S. L.

Kenneth Dorell: Our view is that when we get the new models that we're building in MSL in there and get truly frontier models with novel capabilities that you don't have in other places, then I think that this is just a massive latent opportunity. We know, I mean I would guess that Meta, I think, has the best track record of any company out there of taking a new product that people love and getting it to billions of people in terms of usage. I think that the ability to plug in leading models is going to, I would predict, lead to a very large amount of use of these things over the coming years. I'm very excited about that. In terms of new products, it's not just Meta AI as an assistant.

In there and get like truly frontier models with novel capabilities that you don't have another places then I forgot. This is just a massive latent opportunity, but we know I mean.

Unlike a huge amount of opportunity and maybe the core business as well.

Your next question comes from the line of Mark Shmulik with Bernstein. Please go ahead.

I would guess that meta I think is the best track record of any company out there of taking a new product that people love and getting it to billions of people in terms of usage. So I I think that the ability to plug in leading models is going to.

Yes, hi, thanks for taking the questions.

If you think about the visibility into kind of the runway next year of continued AD performance and engagement improvements. How do you think about kind of the scale of those improvements versus kind of the progress we've seen over the last two years.

I would predict lead to a very large amount of use of these things over the coming years. So I'm I'm very excited about that in terms of new new products. It's not just a meta AI as an assistant I think that theyre going to be all kinds of new products around different content formats, and we're starting to see that with with video and content creation backing up there's going be a lot more like that.

And then Mark as you think about kind of the timing of some of these newer efforts coming out of Super Intelligence Labs is that anchoring to a kind of an updated frontier model on sometime next year like the right way for us to think about it or should we be looking at kind of progress from new products, you're excited to see ship like vibes. Thank you.

Kenneth Dorell: I think that there are going to be all kinds of new products around different content formats, and we're starting to see that with video and content creation. I think there's going to be a lot more like that that I'm quite excited about. Then there are the business versions of all these too, like business AI. That's, of course, one part of the story: the new things that will be possible to build. The other part is how more intelligent models are just going to improve the core business and improve the recommendations that we make across the family of apps and improve the recommendations in advertising. I think there's, as we've shown, this very large amount of headroom, and the opportunity there keeps growing as we are improving and optimizing the AI there. I think that really shows no sign of being near the end.

That I'm quite excited about.

Mm Hmm, thanks, Mark so on the sort of adds improvement side you know.

And then there are the business versions of all of these two like business AI.

And and then that's of course, one part of the story is the new things that will be possible to build and then the other part is how how a more intelligent models or just kind of improve the core business and improve the recommendations that we make across the family of apps and improve.

Some of the innovations that we have been launching actually.

You know involve.

Sort of improving our or larger scale models. So we you know don't use our larger model architectures like job for in France, because of their size and complexity would make it too cost prohibitive them. The way that we drive performance from those models is by using them to transfer knowledge to smaller lightweight models that are used at run time.

The recommendations and advertising and I think there's just a as we've shown there's sort of this very large amount of headroom in the opportunity there keeps growing as we are as we are improving and optimizing the AI there and I think that that really shows no sign of being near the end I think that there is quite a bit more to do there and like I said.

And then in addition to the foundation model work, we are working on advancing our inference models by developing new techniques and architectures that allow us to scale up compute and complexity in an ROI positive way so.

Kenneth Dorell: I think that there's quite a bit more to do there. As I said in response to the last question, we are sort of perennially operating the family of apps and ads business in a compute-starved state at this point, which is on the one hand sort of an odd thing to say given the compute that we've built up. We really are taking a lot of the resources and using them to advance future things that we're doing. We think that there's a lot more compute that we could put towards these that would just unlock a huge amount of opportunity in the core business as well.

In response to the last question.

We are sort of perennially operating.

In General you know we.

The family of apps and ads business in our compute starved state at this point, which.

Obviously, a very large base of advertisers, there's a lot of demand liquidity in the system and even you know small scale improvements that we are able to make in terms of driving you know.

Which is on the on the one hand sort of an odd thing to say given the computer we built up but we really are taking a lot of the resources and using them to advance future things that we're doing and we think that there's a lot more compute that we can put towards the use that that would I'm just unlocking.

<unk> point improvements in the performance of ads or single digit you know.

Increases in conversions relative to impressions in a given quarter you know off of a large base that we're really able to continue to grow the absolute dollars of revenue growth and are in a pretty meaningful way.

Unlock a huge amount of opportunity in the core business as well.

Your next question comes from the line of Mark Shmulik with Bernstein. Please go ahead.

Susan Li: Your next question comes from the line of Mark Shmulik with Bernstein. Please go ahead.

Your next question comes from the line of Justin Post with Bank of America. Please go ahead.

Kenneth Dorell: Yes, thanks for taking the questions. Susan, as you think about the visibility into kind of the run rate next year of continued ad performance and engagement improvements, how do you think about kind of the scale of those improvements versus kind of the progress we've seen over the last two years?

Yes, hi, thanks for taking the questions. Susan as you think about the visibility into kind of the runway next year of continued AD performance and engagement improvements. How do you think about kind of the scale of those improvements versus kind of the progress we've seen over the last two years.

Actually thank you Hey, Justin just give us one second I think there was a second question that we would want to get too on M. S. L.

Yeah, I mean, I'll I'll keep it quick I mean, I don't think we have any specific timing too to announce certainly on on the models of products, but I expect that you will see both we expect to have to build a novel models and novel products and I'm excited to share more when we have it.

Susan Li: Mark, as you think about.

And then Mark as you think about kind of the timing of some of these newer efforts coming out of Super Intelligence Labs is that anchoring to kind of an updated frontier model on sometime next year like the right way for us to think about it or should we be looking at kind of progress from new products, you're excited to see ship like vibes. Thank you.

Kenneth Dorell: Kind of the timing of some of these newer efforts coming out of Superintelligence Labs is us anchoring to kind of an updated frontier model launch sometime next year. Is that the right way for us to think about it, or should we be looking at kind of progress from new products you're excited to see ship like Vibes? Thank you.

Yeah.

Kristen we often please go ahead great. Thanks.

Hum Thanks, Mark so on the sort of adds improvement side you know.

Susan Li: Thanks, Mark. On the sort of ads improvement side, some of the innovations that we have been launching actually involve improving our larger scale models. We don't use our larger model architectures like GEM for inference because their size and complexity would make it too cost prohibitive. The way that we drive performance from those models is by using them to transfer knowledge to smaller lightweight models that are used at runtime. In addition to the foundation model work, we are working on advancing our inference models by developing new techniques and architectures that allow us to scale up compute and complexity in an ROI positive way. In general, we obviously have a very large base of advertisers.

So Mark you mentioned the prior two concepts up cycles, and obviously, you've been able to generate very attractive margins on them as we get into the AI cycle. You know obviously some concerns on the investment but can.

Some of the innovations that we have been launching actually.

You know involve.

Sort of improving our or larger scale models. So we you know don't use our larger model architectures like job for in France, because of their size and complexity would make it too cost prohibitive them. The way that we drive performance from those models is by using them to transfer knowledge to smaller lightweight models that are used at run time.

Can you talk a little bit about how you're thinking about.

That could be coming out for users.

There's some new competition.

And then secondly, how do you think about margins in this content cycle any reason to think that would be different versus prior cycles. Thank you.

Okay.

And then in addition to the foundation model work, we are working on advancing our inference models by developing new techniques and architectures that allow us to scale up compute and complexity and there are a lot of positive way so in.

I think it's too early to really understand what the margin is there going to be for the for the new products that we build I mean, I think certainly every.

In General you know we bought.

Obviously, I'm a very large base of advertisers, there's a lot of demand liquidity in the system and even you know small scale improvements that we are able to make in terms of driving you know.

Each product has somewhat different characteristics and I think well what kind of understand how that goes over time.

Susan Li: There's a lot of demand liquidity in the system and even small scale improvements that we are able to make in terms of driving basis point improvements in the performance of ads or single digit increases in conversions relative to impressions in a given quarter off of a large base mean that we're really able to continue to grow the absolute dollars of revenue growth in a pretty meaningful way. Your next question comes from the line of Justin Post with Bank of America. Please go ahead.

I mean, my general goal is to build a business that maximizes value for.

The people, who use our products and maximizes profitability not in margin. So I think we'll we'll kind of just try to build the <unk>.

At this point improvements in the performance of ads or single digit you know.

Increases in conversions relative to impressions in a given quarter you know off of a large base mean that were really able to continue to grow the absolute dollars of revenue growth and are in a pretty meaningful way.

The best things that we can and and tried to deliver the most value that we can for most people.

Yeah.

Okay.

Your next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Your next question comes from the line of Justin Post with Bank of America. Please go ahead.

Oh, Great Hey, Mark.

Kenneth Dorell: Thank you. Hey Justin, just give us one second. I think there was a second question that we want to get to on MSL. I mean I'll keep it quick. I don't think we have any specific timing to announce certainly on the models or products, but I expect that you will see both. We expect to build novel models and novel products, and I'm excited to share more when we have it. Krista.

Actually thank you Hey, Justin just give us one second I think there was a second.

The goals for competing AI labs are around achieving agi or these other milestones that are kind of like out there and a little esoteric.

Question that we were trying to get to an M. S L.

Yeah, I mean, I'll I'll keep it quick I mean, I don't think we have any specific timing too to announce certainly on on the models of products, but I expect that you will see both we expect to have to build a novel models and novel products and I'm excited to share more when we have it.

How are you setting up your new team in terms of achieving.

Those types of goals versus products that can generate revenue from meta.

Right out of the gate.

And then is the goal that you had articulated to us previously you're wrong, giving billings.

Yeah.

Crystal. Please go ahead great. Thanks.

Susan Li: Justin, please go ahead.

Billions of people kind of a personal AI to use.

Kenneth Dorell: Great, thanks. Mark, you mentioned the prior two content cycles and obviously you've been able to generate very attractive margins on them. As we get into the AI cycle, obviously some concerns on the investment, but can you talk a little bit about how you're thinking about tools that could be coming out for users? I know there's some new competition. Secondly, how you think about margins in this content cycle, any reason to think they would be different versus prior cycles? Thank you. I think it's too early to really understand what the margins are going to be for the new products that we build. I think certainly each product has somewhat different characteristics and I think we'll kind of understand how that goes over time. My general goal is to build a business that maximizes value for the people who use our products and maximizes profitability, not margin.

So Mark you mentioned the prior two concepts cycles, and obviously, you've been able to generate very attractive margins on them as we get into the AI cycle, obviously, some concerns on the investment but.

Still the direction of travel that you see or is there.

Other things like kind of a slide you saw.

Angle.

Do you think are potentially important how should we think about like the overall direction. Thank you.

Can you talk a little bit about how youre thinking about tools that could be coming out for users I know theres some new competition.

Sure. So the way I think about this is that.

And then secondly, how you think about margins in this content cycle any reason to think that would be different versus prior cycles. Thank you.

The research is going to enable new.

Technological capabilities to exist and then those capabilities can get built into all kinds of different products. So the ability to reason more intelligently is for example, very important across a large number of things that would be useful for an assistant at.

Okay.

I think it's too early to really understand what the margin sort of going to be for the for the new products that we build I mean, I think certainly every day.

It will also be useful in business AI. It will also be useful in the AI agent that we're building to help advertisers figure out what their campaigns are going to be.

Each product has somewhat different characteristics and I think well what kind of understand how that goes over time.

I mean, my general goal is to build a business that maximizes value for.

It will also have implications for eventually how we do ranking and recommendations of people speeds and and make different decisions there.

The people, who use our products and maximizes profitability not in margin. So I think we'll we'll kind of just try to build the the best things that we can and and tried to deliver the most value that we can for most people.

Kenneth Dorell: I think we'll kind of just try to build the best things that we can and try to deliver the most value that we can for most people.

That's just one example, I mean, certainly the capability to be able to produce very high quality. Good video is going to be useful for giving people new creative tools. It will help increase the amount of content inventory that can be shown in Instagram and Facebook and therefore should enable an increase in engagement there it should help advertisers.

Yeah.

Okay.

Susan Li: Your next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Your next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Oh, Great Hey, Mark some of the goals for competing AI labs are around achieving agi or these other milestones that are kind of like out there.

Kenneth Dorell: Great. Hey, Mark, some of the goals for competing AI labs are around achieving AGI or these other milestones that are kind of like out there and a little esoteric. How are you setting up your new team in terms of achieving those types of goals versus products that can generate revenue for Meta kind of right out of the gate? Is the goal that you had articulated to us previously around giving, you know, billions of people kind of a personal AI to use still the direction of travel that you see? Is there, you know, other things like kind of this Vibes or Sora angle that you think are potentially important? How should we think about the overall direction? Thank you. Sure.

To be able to create creative that will help us monetize better. So you can just go kind of down the list of capabilities that you would expect and I think each one will enable a bunch of different things that I think the art of product development here is looking at the list of technology capabilities and figuring out what new products are going to be useful and prioritizing those.

Eric.

How are you setting up your new team in terms of achieving.

Those types of goals versus products that can generate revenue from that.

<unk>.

But.

Fundamentally I would sort of expect.

Right out of the gate.

This exponential curve and new technology capabilities that are going to become available and the other thing that I expect is that I think being the best in a given area will drive.

And then is the goal that you had articulated to us previously around giving billings.

Billions of people kind of a personal AI to use.

Still the direction of travel that you see or is there.

Great returns rather than this is not like a check the box exercise of like Okay. We can generate some kind of content and someone else can I think that like the the company that is the best at each of these capabilities I think we'll get a large amount of.

Other things like kind of a slide you saw.

Oh.

Do you think are potentially important how should we think about like the overall direction. Thank.

Thank you.

Yeah.

Sure. So the way that I think about this is that.

Kenneth Dorell: The way that I think about this is that the research is going to enable new technological capabilities to exist, and then those capabilities can get built into all kinds of different products. The ability to reason more intelligently is, for example, very important across a large number of things. It would be useful for an assistant. It will also be useful in business AI. It will also be useful in the AI agent that we're building to help advertisers figure out what their campaigns are going to be. It will also have implications for eventually how we do ranking and recommendations of people's feeds and make different decisions there. That's just one example. Certainly, the capability to be able to produce very high quality, good video is going to be useful for giving people new creative tools.

The research is going to enable new.

The potential value for doing that so there are lots of different capabilities to build I'm not sure that any one company is gonna be divested all of them I doubt that's going to be the case, but a lot of what we're trying to do is not like not kind of do some things that others have done where we're really trying to build novel capabilities and I'm I'm keeping this high level, because I'm not I don't want to necessarily.

Technological capabilities to exist and then those capabilities can get built into all kinds of different products. So the ability to reason more intelligently is for example, very important across a large number of things that would be useful for an assistant it.

It will also be useful in business AI. It will also be useful in the AI agent that we're building to help advertisers figure out what their campaigns are going to be it.

From a competitive or strategic perspective get into what we're prioritizing, but but that hopefully gives you a sense of how we're thinking about what we're doing we want to be able to to kind of build double things.

It will also have implications for eventually how we do ranking and recommendations of People's feeds and and make different decisions.

Build them into a lot of our products and then have the compute to scale them to billions of people and.

There.

And we think that that's going to both.

That's just one example, I mean, it's certainly the capability to be able to produce very high quality. Good video is going to be useful for giving people new creative tools. It will help increase the amount of content inventory that can be shown in Instagram and Facebook and therefore should enable an increase in engagement there it should help advertisers.

Show up in terms of new products could be impossible, and new businesses and very significant improvements to the current business too.

Kenneth Dorell: It will help increase the amount of content inventory that can be shown in Instagram and Facebook and therefore should enable an increase in engagement there. It should help advertisers be able to create creative that will help us monetize better. You can just go kind of down the list of capabilities that you'd expect. I think each one will enable a bunch of different things. I think the art of product development here is looking at the list of technology capabilities and figuring out what new products are going to be useful and prioritizing those. Fundamentally, I would sort of expect this exponential curve in new technology capabilities that are going to become available.

Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Thanks can I just ask.

Just a question on meta AI and both the product and the monetization path. So when you look at it what you've seen that's most encouraging to you in terms of the adoption and the use.

Be able to create creative that will help us monetize better. So you can just go kind of down the list of capabilities that you would expect and I think each one will enable a bunch of different things that I think the art of product development here is looking at the list of technology capabilities and figuring out what new products are going to be useful and prioritizing them.

The use of AI and then when you think about I know you generally like to rollout and then deepen engagement and then later, we think about monetization like where do you think you are on that path now is it clear to you what the monetization options are for meta AI. Thank you very much.

Yeah.

But.

Fundamentally I would sort of expect.

This exponential curve and new technology capabilities that are going to become available and the other thing that I expect is that I think being the best in a given area will drive.

Kenneth Dorell: The other thing that I expect is that I think being the best in a given area will drive great returns, rather than this is not like a check the box exercise of like, okay, we can generate some kind of content and someone else can. I think that the company that is the best at each of these capabilities will get a large amount of the potential value for doing that. There are lots of different capabilities to build. I'm not sure that any one company is going to be the best at all of them. I doubt that's going to be the case. A lot of what we're trying to do is not kind of do some things that others have done. We're really trying to build novel capabilities.

I mean, I think the most promising thing that we're seeing is one that we were able to build something that a large number of people use and that's valuable and then secondly that as we there is a clear correlation as we improve the models and ways that we think make them better that people use them more so.

Great returns rather than this is not like a check the box exercise of like Okay. We can generate some kind of content and someone else can I think that like the the company that is the best at each of these capabilities I think we'll.

That shows that we have a runway to basically be able to improve engagement and turn this into a product that's leading overtime.

Get a large amount of.

The potential value for doing that so there are lots of different capabilities to build I'm not sure that any one company is going to be the best at all of them I doubt that's going to be the case, but a lot of what we're trying to do is not like not kind of do some things that others have done where we're really trying to build novel capabilities and I'm I'm keeping this high level, because I'm not I don't want to necessarily.

In terms of where we are on this and we basically just did this huge effort to to to boot up medicine intelligence labs and build what I am very proud of is I think the the highest talent density lab in the industry. At this point there are a lot of really great researchers and.

Kenneth Dorell: I'm keeping this high level because I don't want to necessarily, from a competitive or strategic perspective, get into what we're prioritizing. That hopefully gives you a sense of how we're thinking about what we're doing. We want to be able to build novel things, build them into a lot of our products, and then have the compute to scale them to billions of people. We think that that's going to both show up in terms of new products being possible, new businesses, and very significant improvements to the current business too.

From a competitive or strategic perspective get into what we're prioritizing, but but that hopefully gives you a sense of how we're thinking about what were doing we wanted to be able to to kind of build novel things.

Trucks your folks in data folks who are who are now a part of this effort who are.

Build them into a lot of our products and then have the compute to scale them to billions of people and.

Who are focused on training the next generation of work and doing some some really novel work and when that is ready I think that we will be able to plug that into a number of the products that we're building and I think that that will be very exciting, but I think that that's really the next thing that we're that we're looking at and then for.

And we think that that's going to both.

Show up in terms of new products being impossible and new businesses and very significant improvements to the current business too.

Susan Li: Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

There I think that these models will also improve monetization and all of the different ways that are there.

We've talked about so far in terms of improving engagement improving advertising, helping advertisers engage I mean, theres one opportunity that we usually talk about on these calls but hasn't it hasn't come up as much here is just.

Kenneth Dorell: Thanks. Can I just ask a question on Meta AI and both product and a monetization path? When you look at it, what you've seen that's most encouraging to you in terms of the adoption and the use of Meta AI? When you think about, I know you generally like to roll out and then deepen engagement and then later think about monetization, where do you think you are on that path now? Is it clear to you what the monetization options are for Meta AI? Thank you very much. I think the most promising thing that we're seeing is one, that we were able to build something that a large number of people use, and I think that's valuable. Secondly, there is a clear correlation as we improve the models in ways that we think make them better, that people use them more.

Thanks can I just ask.

Just a question on meta AI and both the product and the monetization path. So when you look at it what <unk> seen thats most encouraging to you in terms of the adoption and the.

The ability to make it so that advertisers.

The use of AI and then when you think about I know you generally like to rollout and then deepen engagement and then later, we think about monetization like where do you think you are on that path now is it clear to you what the monetization options are for meta AI. Thank you very much.

<unk> are increasingly just gonna be able to give us a business objective and give us a credit card or bank account and by.

Have the AI system, basically figure out everything else, that's necessary, including generating video or or or different types of accretive that might resonate with different people that are personalized and different ways. Finding the right customers are all of these all of the capabilities that we're building I think go towards improving all of these different things so I'm quite optimistic about that.

Yeah.

I mean, I think the most promising thing that we're seeing is one that we were able to build something that a large number of people use and that's valuable and then secondly that as we there is a clear correlation as we improve the models and ways that we think make them better that people use them more so that shows.

Your next question comes from the line of Ronald Josey with Citi. Please go ahead.

Alright, Thanks for taking the question and this maybe dovetails perfectly off Mark what you just talked about and we heard a lot about and then automation here I think reaching a $60 billion are going to hear about if you can talk to us more just about adoption rates amongst the advertisers and then maybe bigger picture as you incorporate ranking recommendation changes like in drama or gens are lettuce.

Kenneth Dorell: That shows that we have a runway to basically be able to improve engagement and turn this into a product that's leading over time. In terms of where we are on this, we basically just did this huge effort to boot up Meta superintelligence labs and build what I am very proud of. I think the highest talent density lab in the industry at this point. There are a lot of really great researchers and infrastructure folks and data folks who are now a part of this effort, who are focused on training the next generation of work and doing some really novel work. When that is ready, I think that we will be able to plug that into a number of the products that we're building. I think that will be very exciting. I think that's really the next thing that we're looking at.

That we have a runway to basically be able to improve engagement and turn this into.

A product that's leading overtime.

In terms of where we are on this and we basically just.

Did this huge effort to two.

Just talk to us how this automation is driving call. It a higher ROI for for advertisers overall as we bring it all together. Thank you yeah.

To boot up medicine intelligence labs, and build what I'm very proud of is I think the highest talent density lab in the industry. At this point there are a lot of really great researchers and infrastructure folks in data folks who are who are now a part of this effort who are who are focused on training the next generation.

Yeah, So we've been.

We've been sort of laying the the continued a brick by brick build of of advantaged plus and extending the set of objectives that it applies to overtime and so in Q3, we completed the global rollout of the streamlined campaign creation flow for advantage plus lead campaigns. So.

<unk> of work and doing some some really novel work.

And when that is ready I think that we will be able to plug that into a number of the products that we're building in and I think that that will be very exciting but.

Now advertisers who are running sales athlete campaigns have end to end automation turned on from the beginning and like you know the kind of application of the streamline campaign creation slow for other objectives. This generally allows advertisers to optimize and automate several aspects of the campaign set up process at once that includes <unk>.

I think that that's really the next thing that we're that we're looking at.

Kenneth Dorell: From there, I think that these models will also improve monetization and all the different ways that we've talked about so far in terms of improving engagement, improving advertising, helping advertisers engage. One opportunity that we usually talk about on these calls that hasn't come up as much here is just the ability to make it so that advertisers are increasingly just going to be able to give us a business objective and give us a credit card or bank account and have the AI system basically figure out everything else that's necessary, including generating video or different types of creative that might resonate with different people that are personalized in different ways, finding who the right customers are. All of the capabilities that we're building go towards improving all of these different things. I'm quite optimistic about that.

And then from there I think that these models will also improve monetization and all of the different ways that are that we've talked about so far in terms of improving engagement improving advertising, helping advertisers engage I mean theres one opportunity that we just we usually talk about on these calls that hasn't hasn't come up as much here is just.

Like our audience selection, where they show the AD how the budget gets paced and distributed across Adsense to this to drive the most efficient outcomes.

The ability to make it so that advertisers.

<unk> are increasingly just going be able to give us a business objective and give us a credit card or bank account and what.

And you know we see that advantage plus continues to drive performance gains advertisers, who run lead campaigns using advantage plus <unk> are seeing a 14% lower cost per lead on average than those than those who are not.

Have the AI system, basically figure out everything else, that's necessary, including generating video or or or different types of creative that might resonate with different people that are personalized and different ways. Finding the right customers are all of these all of the capabilities that we're building I think go towards improving all of these different things so I'm quite optimistic about that.

And I would say that we think that there is still a lot of opportunity generally to grow adoption of advantage plus.

A lot of advertisers only use our end to end automated solutions for a portion of their campaigns. So we can grow share there.

Susan Li: Your next question comes from the line of Ron Josey with Citigroup. Please go ahead.

Your next question comes from the line of Ronald Josey with Citi. Please go ahead.

And to capture that opportunity, we're focused on driving continued performance improvements and addressing some of the key use cases that we still need in order to grow adoption.

Kenneth Dorell: Great, thanks for taking the question. This maybe dovetails perfectly off the mark you just talked about. We heard a lot about end to end automation here. I think reaching a $60 billion ARR. Wanted to hear about if you can talk to us more just about adoption rates amongst the advertisers and then maybe bigger picture as you incorporate ranking recommendation changes like Andromeda or Gems or Lattice. Just talk to us how this automation is driving, call it, a higher ROI for advertisers overall if you bring it all together. Thank you.

Alright, Thanks for taking the question and this maybe dovetails perfectly off Mark what you just talked about and we heard a lot about and then automation here, I think reaching a $60 billion or or or.

Also working to broaden adoption among advertisers who use one of our single step automated solutions for example, advertisers who might only use a piece of it like advantage plus audiences by helping them understand the benefits of using more than one automated system. One automated solution I'm at the same time so.

I wanted to hear about if you can talk to is more just about adoption rates amongst the advertisers and then maybe bigger picture as you incorporate ranking recommendation changes like in drama or gens are allowed us to talk to us. How this automation is it driving call. It a higher ROI for for advertisers overall as we bring it all together.

I would say our advantage plus is sort of an ongoing platform by which we both continue to expand the feature set that is available in advantage plus and then expand the extensibility or the coverage of that feature set to the sort of the broader set of advertisers I'm you know I think mark mentioned that.

Yeah, So we've been.

Susan Li: Yeah, so we've been sort of laying the continued brick by brick build of Advantage+ and extending the set of objectives that it applies to over time. In Q3 we completed the global rollout of the streamlined campaign creation flow for Advantage+ lead campaigns. Now advertisers who are running sales app or lead campaigns have end to end automation turned on from the beginning. Like the kind of application of the streamlined campaign creation flow for other objectives, this generally allows advertisers to optimize and automate several aspects of the campaign setup process at once. That includes things like audience selection, where to show the ad, how the budget gets paced and distributed across ad sets to drive the most efficient outcomes. We see that Advantage+ continues to drive performance gains.

We've been sort of laying the the continued a brick by brick build of of advantaged plus and extending the set of objectives that it applies to over time and so in Q3, we completed the global rollout of the streamlined campaign creation flow for advantage plus lead campaigns. So now.

The annual revenue run rate now for advertisers who are using these automated options as you know a $60 billion and again, we see that there is room to continue growing that.

Now advertisers, who are running sales Apple lead campaigns have end to end automation turned on from the beginning.

Your next question comes from the line of Youssef Squali with Truest Securities. Please go ahead.

And like you know the kind of application of the streamline campaign creation slow for other objectives. This generally allows advertisers to optimize them and automate several aspects of the campaign set up process at once and that includes things like our audience selection, where they show the AD how the budget gets paced and distributed across.

Great. Thank you very much mark on the Wearables in particular do you think you'll be able to sell enough hardware to recoup your investment or is that dependent on maybe creating new avenues for revenue from things like advertising services and commerce through that new computing platform and and if so what are kind of the gating factors there and then Susan.

<unk> adds that said this to drive the most efficient outcomes.

And we see that advantage plus continues to drive performance gains advertisers, who run lead campaigns using advantage plus <unk> are seeing a 14% lower cost per lead on average than those than those who are not.

How do you see the on balance sheet versus off balance sheet financing on of your AI initiatives. You've recently struck would be able to allow for the Louisiana datacenter is that part of the Capex guide for 'twenty six and if it's not how significant will that way of funding.

Susan Li: Advertisers who run lead campaigns using Advantage+ are seeing a 14% lower cost per lead on average than those who are not. I would say that we think there is still a lot of opportunity generally to grow adoption of Advantage+. A lot of advertisers only use our end to end automated solutions for a product portion of their campaigns, so we can grow share there. To capture that opportunity, we're focused on driving continued performance improvements and addressing some of the key use cases that we still need in order to grow adoption. We're also working to broaden adoption among advertisers who use one of our single step automated solutions. For example, advertisers who might only use a piece of it like Advantage+ audiences by helping them understand the benefits of using more than one automated solution at the same time.

And I would say that we think that there is still a lot of opportunity generally to grow adoption of advantage plus.

For <unk> going forward and basically would that slow down your capex growth past 2026. Thank you.

A lot of advertisers only use our end to end automated solutions for a portion of their campaigns. So we can grow share there.

I can talk about Wearables and Susan can jump in on the other part so.

And to capture that opportunity, we're focused on driving continued performance improvements and addressing some of the key use cases that we still need in order to grow adoption.

I know there were a few pieces here one is that the the works out on Ray ban meta and the Oakley meta product is going very well.

We're also working to broaden adoption among advertisers who use one of our single step automated solutions for example, advertisers who might only use a piece of it like advantage plus audiences by helping them understand the benefits of using more than one automated one automated solution I'm at the same time so.

I think yeah, I mean at some point if these continue going as well as it has been.

And then that I think it will be a very profitable investment I think that there's some revenue.

Susan Li: I would say Advantage+ is sort of an ongoing platform by which we both continue to expand the feature set that is available in Advantage+ and then expand the extensibility or the coverage of that feature set to the broader set of advertisers. I think Mark mentioned that the annual revenue run rate now for advertisers who are using these automated options is $60 billion. We see that there's room to continue growing that. Your next question comes from the line of Yusuf Squally with Truist Securities. Please go ahead.

Revenue that we get from from basically selling the devices and then some that will come from additional services and from the AI on top of it. So I think that there's a big opportunity certainly the investment here is not just to to kind of build a just the device. It is also to build these services on top right now.

I would say our advantage plus is sort of an ongoing platform by which we both continue to expand the feature set that is available in advantage plus and then expand the extensibility or the coverage of that feature set to the sort of the broader set of advertisers.

You know I think Mark mentioned that.

A lot of people get the devices.

The annual revenue run rate now for advertisers who are using these automated options as you know $60 billion and again, we see that there is room to continue growing that.

For a range of things that don't even include the AI, even though they liked the AI, but I think overtime. The AI is going to become the main thing that people are using them for it I think that that's going to end up having a big business opportunity by itself.

Your next question comes from the line of Youssef Squali with Truest Securities. Please go ahead.

But you know as as products like the Ray ban and.

Kenneth Dorell: Great.

In Oakley matters are growing.

Susan Li: Thank you very much. Mark, on wearables in particular, do you think you'll be able to sell enough?

Great. Thank you very much mark on the Wearables in particular do you think you'll be able to sell enough hardware to recoup your investment or is that dependent on maybe creating new avenues for revenue from things like advertising services and commerce through that new computing platform.

We're also going to keep on investing in things like the more full field of view.

Kenneth Dorell: Hardware to recoup your investment? Is that dependent on maybe creating new avenues for revenue from things like advertising services and commerce through that new computing platform? If so, what are kind of negating factors there?

Product form of of the Orion prototypes that we showed at connect last year. So those things are obviously earlier in their curve towards getting to being a sustaining business and our general view is that we want to build these out to reach many hundreds of millions or billions of people and that's the point at which we think that this is gonna be I'm just extremely.

So what are kind of the gating factors there and then Susan how do you see the on balance sheet versus off balance sheet financing on of your AI initiatives. You've recently struck a deal with low for the Louisiana datacenter is that part of the Capex guide for 'twenty six and if it's not how significant will that way of funding this import.

Susan Li: Susan, how do you see.

Kenneth Dorell: The on balance sheet versus off balance.

Susan Li: Sheet financing on one of your AI initiatives?

Kenneth Dorell: You've recently struck a deal with Blue Owl.

Susan Li: For the Louisiana data center.

<unk> business.

Kenneth Dorell: Is that part of the CapEx guide for 2026?

Yeah.

You have to your second question. So the JV that we announced with Blue I will is sort of an example of finding a solution that enabled us to partner with external capital providers to co develop data centers in a way that gives us long term optionality in <unk>.

Susan Li: If it's not, how significant will that way of funding be for Meta going forward? Would that slow down your.

Meta going forward and basically would that slow down your capex growth past 2026. Thank you.

Kenneth Dorell: CapEx growth past 2026? Thank you. I can talk about wearables and then Susan can jump in on the other part. I know there are a few pieces here. One is that the work on Ray-Ban Meta and the Oakley Meta product is going very well, I think. Yeah. I mean, at some point, if these continue going as well as it has been, then I think it will be a very profitable investment. I think that there's some revenue that we get from basically selling the devices and then some that will come from additional services and from the AI on top of it. I think that there's a big opportunity. Certainly the investment here is not just to kind of build just the device, it's also to build these services on top.

Yeah.

I can talk about Wearables and Susan can jump in on the other part.

So.

I know there were a few pieces here one is that the the work that on Ray ban meta and the Oakley meta product is going very well I think yeah. I mean at some point if if these continue going as well as it is it has been.

Courting our future capacity needs just given both the magnitude, but also uncertainty of what the the capacity outlook in future years looks like.

In terms of how that is recognized as capex. Our prior capex reflected a portion of the data center build cost prior to the joint venture being established going forward. The construction cost of the data center.

Then.

It will be a very profitable investment I think that there's some revenue that we get from from basically selling the devices and then some that will come from additional services and from the AI on top of it. So I think that there's a big opportunity of certainly the investment here is not just to to kind of build a.

Not the reported recorded in Capex as the data center is constructed we will contribute 20% of the remaining construction costs required which is inline with our ownership stake and those will be recorded as other investing cashless.

Just the device. It's also to build these services on top right.

Your last question comes from the line of Ken Go Ralsky with Wells Fargo. Please go ahead.

Kenneth Dorell: Right now a lot of people get the devices for a range of things that don't even include the AI, even though they like the AI. I think over time the AI is going to become the main thing that people are using them for and I think that that's going to end up having a big business opportunity by itself. As products like the Ray-Ban Meta and Oakley Meta are growing, we're also going to keep on investing in things like the more full field of view product form of the Orion prototype that we showed at Connect last year. Those things are obviously earlier in their curve towards getting to being a sustainability outstanding business. Our general view is that we want to build these out to reach many hundreds of millions or billions of people.

Right now a lot of people get the devices for a range of things that don't even include the AI, even though they liked the AI, but I think overtime. The AI is going to become the main thing that people are using them for it I think that that's going to end up having a big business opportunity by itself.

Thank you just one for me please mark as you think about where the.

Hopefully a leading frontier model next year in hand could you talk about where you think the value will accrue in this evolving ecosystem will be with the platforms or do you think that this will be mostly the value will accrue to the scaled first party applications. Thank you.

But you know as as products like the Ray ban.

In Oakley meadows are growing.

We're also going to keep on investing in things like the more full field of view product form of of the Orion prototypes that we showed at connect last year. So those things are obviously earlier in their curve towards getting to being a sustaining business and our general view is that we want to build these out to reach many hundreds of millions or billions of people and that's it.

Okay.

Hmm.

I'm not exactly sure what you mean by platform versus application in this context, but.

I mean, I think that I mean.

If there's just a lot of value to create with AI overall, so I mean, clearly you're seeing the.

Kenneth Dorell: That's the point at which we think that this is going to be just an extremely profitable business.

The point of which we think that this is gonna be I'm just extremely profitable business.

The people who are making the hardware.

Nvidia is doing an amazing job right I think extremely well deserved success.

Hum yourself to your second question, so the JV that we announced with Blue idle.

Susan Li: Yousef, to your second question. The JV that we announced with Blue Owl is an example of finding a solution that enabled us to partner with external capital providers to co-develop data centers in a way that gives us long-term optionality in supporting our future capacity needs, given both the magnitude and also uncertainty of what the capacity outlook in future years looks like. In terms of how that is recognized as CapEx, our prior CapEx reflected a portion of the data center build cost prior to the joint venture being established. Going forward, the construction costs of the data center will not be recorded in CapEx. As the data center is constructed, we will contribute 20% of the remaining construction costs required, which is in line with our ownership stake, and those will be recorded as other investing cash flows.

So the cloud partners and companies are making are doing very well I think that that will likely continue I think there's a huge opportunity there and but if you look at it today.

Is sort of an example of finding a solution that enabled us to partner with external capital providers to co develop data centers in a way that gives us long term optionality in supporting our future capacity needs just given both the magnitude, but also uncertainty of what the the capacity outlook in future years.

The the companies that are building up so I mean, a lot of the ops are still relatively small and.

And I don't know if that's obviously going to be a huge opportunity, but I think what we've seen overall is.

It looks like.

<unk> is basically.

In terms of how that is recognized as capex. Our prior capex reflected a portion of the data center build cost prior to the joint venture being established going forward. The construction cost of the data center.

Now people take.

But individual technology advances and build them into products that then build either community use or other kinds of network effects and then ended up being very sustaining.

<unk> and I know, what we haven't really seen as much in.

Not the reported recorded in Capex as the data center is constructed we will contribute 20% of the remaining construction costs required which is inline with our ownership stake and those will be recorded as other investing cashless.

In the history of the technology industry is the rate of new capability is being introduced because around each of these capabilities you can build many new products.

Each will turn into interesting businesses. So.

Susan Li: Your last question comes from the line of Ken Gawrelski with Wells Fargo. Please go ahead.

Your last question comes from the line of Ken Go Ralsky with Wells Fargo. Please go ahead.

Yeah. So I don't know I mean, I'm I'm I'm generally pretty optimistic about.

About there being a very large opportunity, but in terms of new things to build I think being able to.

Kenneth Dorell: Thank you. Just one for me please. Mark, as you think about with hopefully a leading frontier model next year in hand, could you talk about where you think the value will accrue in this evolving ecosystem, will it be with the platforms? Do you think that this will be mostly the value will accrue to the scaled first party applications? Thank you. I guess I'm not exactly sure what you mean by platform versus application in this context, but I mean I think that there's just a lot of value to create with AI overall. Clearly you're seeing the people who are making the hardware. Nvidia is doing an amazing job, right. I think extremely well deserved success. The cloud partners and companies are making or doing very well. I think that that will likely continue. I think there's a huge opportunity there.

Thank you just one for me please mark as you think about with.

To build them and then scale them to billions of people is a huge.

Hopefully a leading frontier model next year in hand could you talk about where you think the value will accrue.

Muscle that meta has developed and I think we do very well.

The evolving ecosystem will be with the platforms or do you think that this will be mostly the value will accrue to the scaled first party applications. Thank you.

And.

I, certainly think that that's going to deliver a huge amount of value both in the core business for all the ways that we talked about how it's going to improve recommendations and the quality of the services as well as unifying the models together and so that way. When these systems are deciding what to show that can just pull from a wider pool.

Yeah.

Okay.

Hmm I guess I'm not exactly sure what you mean by platform versus application in this context, but.

No.

There are things that we've just seen over the.

I mean, I think that I mean I.

If there's just a lot of value to create with AI overall, so I mean, clearly you're seeing the.

20, plus years of running the company that Theyre, just deliver consistent wins and we're going to keep on being able to make the systems.

The people who are making the hardware.

More general and smarter and make better recommendations for people that have a larger pool of inventory and.

And video is doing an amazing job right I think extremely well deserved success with our cloud partners and companies are making are doing very well I think that that will likely continue I think there's a huge opportunity there and but if you look at it today.

That is all going to be great.

And then there's going to be a lot of new things that I think we're gonna be taken scale to billions of people over time and build new businesses, whether that's advertising or commerce supported or people paying for it or different kinds of things. So.

Kenneth Dorell: If you look at it today, the companies that are building apps, a lot of the apps are still relatively small and I think that that's obviously going to be a huge opportunity. What we've seen overall is basically people take individual technology advances and build them into products that then build either communities or other kinds of network effects and then end up being very sustaining businesses. I think what we haven't really seen as much in the history of the technology industry is the rate of new capabilities being introduced. Around each of these capabilities you can build many new products that I think each will turn into interesting businesses. Yes, I don't know. I'm generally pretty optimistic about there being a very large opportunity.

The the companies that are building up so I mean, a lot of the ops are still relatively small and.

Yeah, It's I think it's pretty early but you know I think we're seeing the returns in the core business.

And I know, that's obviously going to be a huge opportunity and I think what we've seen overall is.

That's giving us a lot of confidence that we should be investing a lot more and we want to make sure that we're not under investing.

Is basically.

You know people take.

Great. Thank you everyone for joining us today, we look forward to speaking with you again soon.

Like individual technology advances and build them into products that then build either community use or other kinds of network effects and then ended up being very sustaining.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

And I think what we haven't really seen as much.

And the history of the technology industry is the rate of new capability is being introduced because around each of these capabilities you can build many new products.

I think each will turn into interesting businesses. So.

Yeah. So I don't know I mean, I'm I'm I'm generally pretty optimistic about.

About there being a very large opportunity, but in terms of new things to build I think being able to.

Kenneth Dorell: In terms of new things to build, I think being able to build them and then scale them to billions of people is a huge muscle that Meta has developed and I think we do very well. I certainly think that that's going to deliver a huge amount of value both in the core business for all the ways that we talked about how it's going to improve recommendations and the quality of the services as well as unifying the models together. That way when these systems are deciding what to show, they can just pull from a wider pool. These are things that we've just seen over the 20+ years of running the company, that they just deliver consistent wins. We're going to keep on being able to make the systems more general and smarter and make better recommendations for people and have a larger pool of inventory.

To build them and then scale them to billions of people is a huge muscle that meta has developed and I think we do very well.

And.

I, certainly think that that's going to deliver a huge amount of value both in the core business for all the ways that we talked about how it's going to improve recommendations and the quality of the services as well as unifying the models together and so that way. When these systems are deciding what to show that can just pull from a wider pool.

These are things that we've just seen over the 20 plus years of running the company that they're just deliver consistent wins and we're going to keep on being able to make the systems.

More general and smarter and make better recommendations for people that have a larger pool of inventory and AR.

Kenneth Dorell: That is all going to be great. There is going to be a lot of new things that I think we're going to be able to take and scale to billions of people over time and build new businesses, whether that's advertising or commerce supported or people paying for it, or different kinds of things. I think it's pretty early, but I think we're seeing the returns in the core business that's giving us a lot of confidence that we should be investing a lot more and we want to make sure that we're not under investing. Great. Thank you everyone for joining us today. We look forward to speaking with you again soon.

That is all going to be great and then theres going be a lot of new things that I think we're gonna be taken scale to billions of people over time and build new businesses, whether that's advertising or commerce supported or people paying for it or different kinds of things. So.

Yeah, It's I think it's pretty early but you know I think we're seeing the returns in the core business.

That's giving us a lot of confidence that we should be investing a lot more and we want to make sure that we're not under investing.

Okay.

Thank you everyone for joining us today, we look forward to speaking with you again soon.

Susan Li: This concludes today's conference call. Thank you for your participation and you may now disconnect.

This concludes today's conference call. Thank you for your participation and you may now disconnect.