Meta Soars Over 10% as Ad Revenue Eases AI Spending Concerns

TradingKey -Meta shares soared more than 10% in after-hours trading on Wednesday, following the release of its better-than-expected Q2 2025 revenue and strong Q3 guidance. The social media giant announced an increase in spending, attributing the move to the rapid growth of its advertising business, which is robust enough to support its substantial investments in artificial intelligence.

Meta now anticipates total spending for 2025 to fall between $66 billion and $72 billion. This is up from the $64 billion to $72 billion expected in its Q1 report in April and an earlier forecast of $60 billion to $65 billion in Q4 of the previous year, reflecting a quarterly increase in capital expenditure budgets.

According to Meta's Chief Financial Officer Susan Li, the primary drivers of this rising expenditure are infrastructure costs and employee compensation. The company plans to continue significant investments in these areas to stay competitive in the rapidly evolving AI race.

In the past, there were concerns that Meta's revenues could not keep pace with its escalating expenditures. Earlier this month, Needham expressed concerns that Meta’s capital expenditure growth rate could be a disadvantage in the large language model race against bigger rivals, citing uncertain returns on these investments and the risk of increased waste with higher spending.

However, Meta's strong Q2 performance has alleviated doubts about the company's financial sustainability. The earnings report revealed a robust operating profit margin of 43%, with advertising revenue reaching $46.5 billion, surpassing the anticipated $44.07 billion. CEO Mark Zuckerberg emphasized that Meta's stable advertising business provides ample financial support for expanding its AI market share.

Additionally, AI improvements have bolstered the company’s advertising business. Zuckerberg highlighted in the earnings call that the quarter’s impressive results were largely due to AI-driven efficiency gains in the ad system, with AI expected to drive all aspects of Meta's operations in the future.

Hargreaves Lansdown equity analyst Matt Britzman echoed Zuckerberg’s sentiments, noting that AI enhancements enabled Meta to raise average ad prices, contributing to its strong Q2 performance. Britzman remains optimistic about Meta’s significant spending, suggesting it may impact profits in the short term but position Meta as a clear winner in the AI sector in the long run.

Forrester analyst Mike Proulx views these expenditures as essential, asserting that winning the AI race requires deep pockets.

TradingKey analyst Petar anticipates further developments from Meta, stating, "the exciting part for Meta has not even started yet," as the company’s hefty spending, including recent large-scale hiring, has yet to translate into tangible improvements in AI capabilities or reflect on financial statements.

As of the latest report, Meta shares were up approximately 12% in pre-market trading on Thursday, with a year-to-date increase of over 18%.