Meta Q3 Earnings Preview: Revenue Could Beat Expectations, but 2027 Spending Is the Real Point of Divergence
Original author: Xu Chao
Original source: Wallstreetcn
Meta will release its third-quarter results after the close on October 21. The market is broadly optimistic about revenue for the quarter, but the real divergence lies in whether a balance can be achieved between 2027 capital expenditure and AI monetization—which will determine the stock's direction after the earnings report.
According to BofA Securities analyst Justin Post, Meta's third-quarter revenue is expected to be approximately $63.8 billion, slightly above the consensus estimate of $63.3 billion. The core basis for this judgment is healthy growth shown in advertising market channel checks. BofA maintains its Buy rating on Meta and an $810 price target.
Beyond the current quarter's results, the 2027 spending path is the true focus of this earnings report. Meta faces a one-time $10 billion state attorney general settlement accrual, which will bring third-quarter GAAP operating income down to $11.5 billion, far below the market expectation of $18.6 billion; EPS will also fall to $3.79, compared with the consensus estimate of $6.08. Excluding this non-recurring item, BofA estimates earnings above consensus, but analysts warn that if management signals further increases in 2027 capital expenditure or operating expenses, or if AI monetization is delayed beyond expectations, the risk of stock price pressure cannot be ignored.
Revenue Side: Ad Checks Provide Support
The logic for a third-quarter revenue beat is relatively clear. Justin Post noted that channel checks from the advertising market are fairly solid, supporting BofA's above-consensus revenue forecast. BofA estimates $63.8 billion, slightly above the Street's $63.3 billion expectation, and analysts believe the market's implied expectation may already be close to $64 billion.
From the options market perspective, the implied move for Meta's earnings is approximately 4.1%, while the average actual move over the past eight quarters was as high as 7.4%, meaning current options pricing is relatively cheap versus history. BofA derivatives team data shows that Meta's implied volatility score ranks low in long/short screens, reflecting a market that is overall optimistic about the quarter's results and anticipating insufficient volatility.
GAAP Profit Distortion: Impact of One-Time Settlement Accrual
This quarter's GAAP profit figures will be significantly distorted by one-time items.
Meta previously announced that, due to the "youth protection" lawsuit, the company will record $10 billion in third-quarter charges related to the state attorney general settlement. BofA expects this to bring third-quarter GAAP operating income down to approximately $11.5 billion, well below the consensus of $18.6 billion; correspondingly, GAAP EPS is expected to be $3.79, while the consensus estimate is $6.08.
BofA emphasized that excluding this non-recurring accrual, the company's profitability is actually above consensus levels, and investors need to distinguish between these two sets of figures to avoid misreading the profit numbers.
2027 Spending: The Real Test on the Conference Call
There is not much divergence in the market over current-quarter revenue; what is truly making investors nervous is the medium-term spending path.
BofA analysts listed the main risk items for this earnings call: first, management signaling further upside room in 2027 capital expenditure or operating expenses; second, delays in the AI monetization timeline—AI products such as Muse will consume substantial computing resources in the near term yet have not yet generated direct revenue contribution.
Analysts expect Meta will not provide formal 2027 capital expenditure guidance on this call, but may offer a qualitative framework.
From a broader perspective, BofA equity strategist Savita Subramanian noted that this year the capex growth of tech giants has outpaced revenue growth by roughly 50% versus 20%, while consensus models rely on the assumption that AI-related revenue will catch up with capital expenditure in the second half of 2027. If the content of Meta's conference call shakes this assumption, it will constitute substantial valuation pressure.
Conference Call Focus: AI Progress and Monetization Path
In addition to spending issues, analysts expect the conference call to also focus on the following areas: Muse user adoption and cost per user token, enterprise AI opportunities, and large language model and infrastructure strategy.
Potential positive catalysts include: AI providing an additional boost to the advertising business, disclosure of user traction data for new AI products, and outlook related to improved infrastructure efficiency. Potential risks come from soft fourth-quarter guidance due to the macroeconomic environment, exchange rates, or diminishing marginal AI benefits, as well as a lack of clarity on the 2027 AI monetization path.
