Meta to report third-quarter earnings after the bell

Meta is poised to report third-quarter earnings with LSEG analysts projecting $6.69 EPS and $49.4 billion in revenue, a 22% year-over-year increase. Investors will closely monitor for further insights into the company's substantial AI investments, highlighted by a recent $27 billion data center joint venture and prior guidance for accelerated expense growth through 2026 driven by AI. This focus on AI is underscored by recent layoffs in its Superintelligence Labs, rising Meta AI app downloads despite competition from OpenAI's Sora, and a strategic shift of a key metaverse executive to the AI unit, alongside an anticipated $5.1 billion operating loss for Reality Labs, suggesting a potential pivot from its metaverse strategy towards AI.

Analysis

Meta is poised to report Q3 earnings, with LSEG analysts projecting $6.69 EPS and $49.4 billion in revenue, representing a 22% year-over-year increase. The primary investor focus will be on the company's substantial AI investments, including the recent $27 billion data center joint venture with Blue Owl Capital and prior guidance for accelerated expense growth through 2026. This strategic pivot is underscored by a raised 2025 expense outlook of $114 billion-$118 billion.

While Meta AI app downloads surged 56% month-over-month to 3.9 million following the Vibes short video tool launch, competition is evident. OpenAI's Sora app recorded 2.6 million iOS downloads from Sept 30-Oct 18, exceeding Meta AI's 1.1 million during the same period, despite Meta's creator incentives. The lukewarm debut of Llama 4 and recent layoffs in its Superintelligence Labs also indicate ongoing challenges in AI development.

A clear strategic shift away from the metaverse is apparent, with former metaverse lead Vishal Shah transitioning to an AI product leadership role. The Reality Labs unit is projected to incur a substantial $5.1 billion operating loss on just $316 million in sales for Q3, highlighting the financial burden of its metaverse ambitions. This re-prioritization towards AI, despite its high cost and competitive landscape, signals a definitive strategic direction for Meta.

Key Decisions for Investors

• Monitor Q3 earnings for actual AI investment figures and updated expense guidance, particularly the 2026 outlook, as these will impact future profitability.
• Assess the traction and monetization potential of Meta AI products, especially relative to competitors like OpenAI's Sora, given the significant R&D spend and creator incentives.
• Evaluate the financial implications of the metaverse pivot, specifically the Reality Labs operating losses, and how this re-allocation of resources to AI will affect overall capital expenditure and long-term growth prospects.