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META Q3 Earnings Call Put Spotlight on Muse Growth and AI Spending
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Key Takeaways
Meta's Muse AI attracted over 10 million users in six weeks, with roughly 25% using the service daily.
META's Q3 revenues surged 26% to $64.6 billion, driven by higher ad impressions and stronger pricing.
Meta projects 2026 capital spending of $135B-$145B as it expands AI infrastructure and enterprise offerings.
Meta Platforms, Inc. (META - Free Report) used its third-quarter 2026 earnings call to emphasize accelerating adoption of its Muse personal AI agent, expanding monetization opportunities and continued investment in artificial intelligence infrastructure.
Management highlighted strong advertising momentum and improving AI capabilities while acknowledging substantial compute requirements, elevated capital spending and the need to establish sustainable economics for emerging AI businesses.
Meta Sees Early Traction for Muse
Chief executive officer Mark Zuckerberg said more than 10 million users in the United States and Canada established Muse personal agents within approximately six weeks of launch, with roughly 25% using the service daily.
Shopping has emerged as Muse's leading use case, with more than one-quarter of users engaging in commerce and average purchases exceeding $200, including travel transactions.
Zuckerberg outlined a monetization strategy combining transaction fees, premium subscriptions and enterprise services. He expects compute efficiency to improve more than tenfold over the next year, supporting plans to serve over 1 billion users.
META's Advertising Engine Maintains Momentum
Chief financial officer Susan Li reported third-quarter revenues of $64.6 billion, up 26% year over year, exceeding the Zacks Consensus Estimate of $63.41 billion. Adjusted earnings of $7.4 per share surpassed the $6.52 consensus estimate.
Meta Platforms, Inc. Price, Consensus and EPS Surprise
Advertising impressions increased 10%, while average pricing improved 14%. Li attributed performance to stronger engagement, improved ad relevance and favorable macroeconomic conditions relative to last year.
AI-driven recommendation improvements supported double-digit Instagram time-spent growth. Nearly 10 million advertisers used generative AI creative tools, while partnership advertising surpassed a $15 billion annual revenue run rate.
Meta Projects Strong Growth Amid Higher Spending
Li guided fourth-quarter revenues to $73 billion-$76 billion, incorporating an approximately 1% foreign-exchange headwind to year-over-year growth.
Full-year 2026 expenses are projected at $175 billion-$179 billion, including a $9.9 billion legal charge. Capital expenditure guidance narrowed to $135 billion-$145 billion from $130 billion-$145 billion.
Management expects strong revenue growth throughout 2027, supported by advertising improvements and emerging AI businesses. During JPMorgan's questioning, Li emphasized that 2027 investment budgets remain under development, with additional quantitative guidance expected during the fourth-quarter earnings call.
META Faces Pressure From Infrastructure Costs
Third-quarter capital expenditures totaled $34.91 billion, while free cash flow was negative $2.12 billion, reflecting substantial infrastructure investment.
Li identified cloud spending, depreciation and third-party AI token costs as important expense drivers. Management continues developing capacity for model training, existing advertising systems and new AI products.
During Barclays' questioning about Muse economics, Li acknowledged significant serving costs but outlined efficiency initiatives involving smaller models, improved GPU utilization and off-peak computing capacity. Management emphasized reducing inference costs alongside expanding adoption.
Meta Expands Its Enterprise AI Ambitions
Zuckerberg identified model APIs, Muse Code and business agents as initial enterprise offerings, with longer-term plans connecting personal and commercial agents.
Li highlighted access to approximately 500 million self-identified small businesses using Meta's platforms. Muse's business capabilities include campaign development, customer communications and operational assistance through third-party integrations.
During Goldman Sachs' questioning, management addressed commercial resistance to autonomous agents. Li described a transition toward permission-based interactions using authenticated APIs and business partnerships, supported by Meta's proposed Personal Agent Protocol.
META Introduces New Capital Structure
Li announced plans to establish publicly traded, nonvoting Class C shares, distributed through a stock dividend effectively creating a two-for-one stock split.
The new structure is intended to expand financing flexibility for infrastructure investments, acquisitions and employee compensation while preserving existing shareholder voting rights.
Responding to Goldman Sachs, Li clarified that Meta has no specific financing transactions planned. Trading in the new shares is expected to begin in late January 2027.
Meta Balances AI Expansion With Financial Discipline
Management's commentary reflected confidence in AI-driven engagement improvements alongside recognition of the substantial investment required to scale Muse and enterprise offerings.
Zuckerberg emphasized expanding distribution and monetization while improving compute efficiency. Li maintained that investments supporting emerging AI businesses will take longer to generate returns than existing advertising initiatives.
What META's Zacks Rank and Style Scores Indicate
META currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term earnings-revision outlook. Its Value, Growth and VGM Score of B each reflects favorable characteristics across these investment styles, while its Momentum Score of A indicates particularly strong price-momentum characteristics.
These favorable Style Scores complement the Zacks Rank but do not provide the same combined signal associated with Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks carrying an A or B score. The Zacks Rank can change as analysts revise earnings estimates following the third-quarter results.
View the Zacks #1 Rank List
Image: Bigstock
META Q3 Earnings Call Put Spotlight on Muse Growth and AI Spending
Key Takeaways
Meta Platforms, Inc. (META - Free Report) used its third-quarter 2026 earnings call to emphasize accelerating adoption of its Muse personal AI agent, expanding monetization opportunities and continued investment in artificial intelligence infrastructure.
Management highlighted strong advertising momentum and improving AI capabilities while acknowledging substantial compute requirements, elevated capital spending and the need to establish sustainable economics for emerging AI businesses.
Meta Sees Early Traction for Muse
Chief executive officer Mark Zuckerberg said more than 10 million users in the United States and Canada established Muse personal agents within approximately six weeks of launch, with roughly 25% using the service daily.
Shopping has emerged as Muse's leading use case, with more than one-quarter of users engaging in commerce and average purchases exceeding $200, including travel transactions.
Zuckerberg outlined a monetization strategy combining transaction fees, premium subscriptions and enterprise services. He expects compute efficiency to improve more than tenfold over the next year, supporting plans to serve over 1 billion users.
META's Advertising Engine Maintains Momentum
Chief financial officer Susan Li reported third-quarter revenues of $64.6 billion, up 26% year over year, exceeding the Zacks Consensus Estimate of $63.41 billion. Adjusted earnings of $7.4 per share surpassed the $6.52 consensus estimate.
Meta Platforms, Inc. Price, Consensus and EPS Surprise
Meta Platforms, Inc. price-consensus-eps-surprise-chart | Meta Platforms, Inc. Quote
Advertising impressions increased 10%, while average pricing improved 14%. Li attributed performance to stronger engagement, improved ad relevance and favorable macroeconomic conditions relative to last year.
AI-driven recommendation improvements supported double-digit Instagram time-spent growth. Nearly 10 million advertisers used generative AI creative tools, while partnership advertising surpassed a $15 billion annual revenue run rate.
Meta Projects Strong Growth Amid Higher Spending
Li guided fourth-quarter revenues to $73 billion-$76 billion, incorporating an approximately 1% foreign-exchange headwind to year-over-year growth.
Full-year 2026 expenses are projected at $175 billion-$179 billion, including a $9.9 billion legal charge. Capital expenditure guidance narrowed to $135 billion-$145 billion from $130 billion-$145 billion.
Management expects strong revenue growth throughout 2027, supported by advertising improvements and emerging AI businesses. During JPMorgan's questioning, Li emphasized that 2027 investment budgets remain under development, with additional quantitative guidance expected during the fourth-quarter earnings call.
META Faces Pressure From Infrastructure Costs
Third-quarter capital expenditures totaled $34.91 billion, while free cash flow was negative $2.12 billion, reflecting substantial infrastructure investment.
Li identified cloud spending, depreciation and third-party AI token costs as important expense drivers. Management continues developing capacity for model training, existing advertising systems and new AI products.
During Barclays' questioning about Muse economics, Li acknowledged significant serving costs but outlined efficiency initiatives involving smaller models, improved GPU utilization and off-peak computing capacity. Management emphasized reducing inference costs alongside expanding adoption.
Meta Expands Its Enterprise AI Ambitions
Zuckerberg identified model APIs, Muse Code and business agents as initial enterprise offerings, with longer-term plans connecting personal and commercial agents.
Li highlighted access to approximately 500 million self-identified small businesses using Meta's platforms. Muse's business capabilities include campaign development, customer communications and operational assistance through third-party integrations.
During Goldman Sachs' questioning, management addressed commercial resistance to autonomous agents. Li described a transition toward permission-based interactions using authenticated APIs and business partnerships, supported by Meta's proposed Personal Agent Protocol.
META Introduces New Capital Structure
Li announced plans to establish publicly traded, nonvoting Class C shares, distributed through a stock dividend effectively creating a two-for-one stock split.
The new structure is intended to expand financing flexibility for infrastructure investments, acquisitions and employee compensation while preserving existing shareholder voting rights.
Responding to Goldman Sachs, Li clarified that Meta has no specific financing transactions planned. Trading in the new shares is expected to begin in late January 2027.
Meta Balances AI Expansion With Financial Discipline
Management's commentary reflected confidence in AI-driven engagement improvements alongside recognition of the substantial investment required to scale Muse and enterprise offerings.
Zuckerberg emphasized expanding distribution and monetization while improving compute efficiency. Li maintained that investments supporting emerging AI businesses will take longer to generate returns than existing advertising initiatives.
What META's Zacks Rank and Style Scores Indicate
META currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term earnings-revision outlook. Its Value, Growth and VGM Score of B each reflects favorable characteristics across these investment styles, while its Momentum Score of A indicates particularly strong price-momentum characteristics.
These favorable Style Scores complement the Zacks Rank but do not provide the same combined signal associated with Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks carrying an A or B score. The Zacks Rank can change as analysts revise earnings estimates following the third-quarter results.
You can see the complete list of today’s Zacks #1 Rank stocks here.