Meta Earnings: Strong Advertising Demand Drives Impressive Cash Flow Despite Ramping Investments

Meta continues to deliver solid results amid strong digital advertising demand while investing aggressively in AI-related infrastructure, technology, and products. The firm tightened its capital spending forecast to the upper end of its previous expectations and said that investment growth will be “significant” in 2025. Meta reiterated that it believes the computing capacity it is building can be used for various tasks, with the flexibility to shift wherever the best opportunities emerge, a similar view that Alphabet has shared. We aren’t convinced Meta will earn strong returns on its infrastructure investment, but we expect the firm will continue to generate strong cash flow regardless of the direction AI takes. We were also pleased the firm maintained its expense forecast for the year. We are increasing our fair value estimate to $450 from $400.