Meta Q2 2025 earnings call: A glimpse of superintelligence

Meta delivered a robust quarter in Q2 2025, with strong performance driven by its core advertising business and accelerating user engagement. The company’s AI investments are paying off with an increase in user time spent on both Facebook and Instagram, largely fuelled by a surge in video viewership. This engagement translated directly to its bottom line, with an increase in ad impressions and a healthy rise in the average price per ad, as the company’s AI models continued to improve ad effectiveness for advertisers.

Meta’s revenue grew 21.6% year-on-year to US$47.5 billion in Q2 2025. The company exceeded its own revenue guidance in Q2, as the expected macroeconomic pressures on advertising spend were not as severe as initially forecast.

Despite higher infrastructure costs and partner payments, the company’s operating margin improved strongly from 38.0% in Q2 2024 to 43.0% in Q2 2025 as it benefited from the extension of server useful lives.

The growth in the revenue from its Family of Apps was driven by broad-based ad revenue growth. There was a rebound in spending from Asia-based online commerce advertisers and robust growth from smaller North American advertisers. The online commerce vertical was the biggest contributor followed by professional services and technology. Europe recorded the strongest ad revenue growth at 24% followed by Rest of World at 23%, North America at 21% and Asia-Pacific at 18%. Other revenue from its Family of Apps surged 49.9%, led by WhatsApp paid messaging and Meta Verified subscriptions.

Despite higher sales of AI glasses and increased revenue from the Reality Labs segment, its operating loss remained at US$4.5 billion during the quarter. The segment also recorded lower Quest (virtual and mixed reality headsets) sales.

Capital expenditures amounted to US$17.0 billion during the quarter, driven by investments in servers, data centres, and network infrastructure for its AI roadmap. Full-year CapEx in 2025 is anticipated to be in the range of US$66-72 billion and focused on shorter-live assets. While Meta will continue to use its own cash, it is now seeking external financing partners to co-develop data centres. These investments may temporarily affect profit but are necessary for the AI infrastructure required to deliver future growth, as the company remains capacity-constrained.

The company spent US$9.8 billion buying back its shares and distributed dividend totalling US$1.3 billion to shareholders during the quarter.

Meta aims to bring personal “superintelligence” to everyone through its products, including recommendation engines as well as consumer-facing AI assistants. While the company’s AI systems are seeing improvements that are “slow but undeniable,” its long-term vision remains clear. To accelerate this goal, Meta has established the Meta Superintelligence Labs, which consolidates its foundations, product, and FAIR (Fundamental AI Research) teams under the leadership of prominent new hires. It continues to own a minority investment in Scale AI.

In Q3 2025, Meta expects the advertising trends to be healthy and will benefit from ongoing investments in its AI-powered ad performance tools. The company will also benefit from lapping a period of decelerating growth from the previous year. Revenue in the upcoming quarter is expected to range between US$47.5 billion and US$50.5 billion. The company forecasts that the year-over-year revenue growth rate in Q4 will be lower than Q3 due to a strong growth in Q4 2024 as it anticipates higher infrastructure costs, depreciation expense, operating costs, employee compensation.

Family of Apps

In June 2025, over 3.4 billion users use at least one of its Family of Apps. The number of daily active users continues to grow across Facebook, Instagram, and WhatsApp as it improved its recommendation systems and product experiences.

The company is optimising ad delivery across surfaces to maximise revenue while also launching new AI-powered tools, such as the Edits app, to help creators produce more engaging content. During the quarter, the 11% increase in the number of ad impressions served was led by broad-based growth across all regions, primarily driven by the Asia-Pacific. This growth was fuelled by strong engagement tailwinds on both Facebook and Instagram, along with ad load optimisations on Facebook. Increased advertiser demand and better ad performance contributed to the 9% rise in the average price per ad, though this growth was modestly tempered by the accelerated impression growth during the quarter.

Meta’s ad systems improvements in Q2 2025 including the new Andromeda model, the Generative Ads Recommendation System (GEM), and the expansion of the Lattice model architecture led to ad conversion rate increases of approximately 4% on Facebook Feed and Reels as well as 5% on Instagram. Conversions growing faster than impressions and healthy cost per action trends are indicators of the ad business’s health. Meta’s AI is making ads more effective and accessible for advertisers, which drives long-term revenue.

On the product side, the global rollout of Advantage+ sales campaigns has exceeded expectations, showing robust revenue growth and future business opportunities. These AI-powered ad creative tools are now used by nearly 2 million advertisers, and there is strong adoption of its new Image Expansion tool, especially among small and medium-sized businesses.

In Q2, Meta expanded its ad tools by rolling out its incremental attribution feature globally, which reports on conversions that would not have happened without the ad. Omnichannel ads were also launched. It is a single campaign solution to optimise for sales both in-store and online. In tests, these ads have shown a median 15% reduction in total cost per purchase for advertisers compared to website-only optimisation.

Using Llama in back-end processes led to a 30% drop in bug reports. It shows that Meta’s AI investments are not just for user-facing products but is also making the company more efficient.

Facebook and Instagram

Facebook and Instagram users spent more time on the platforms during the quarter, with an increase of 5% on Facebook and 6% on Instagram, primarily driven by improved AI recommendations and a surge in video viewership. In Q2 2025, Instagram users globally and Facebook users, particularly in the U.S. spent more time watching videos (both up more than 20% year-on-year). The company focuses more on promoting original content and helps smaller content creators gain traction as original posts now make up over two-thirds of the recommended content on Instagram in the U.S. Meta is also using Llama 4 to build autonomous AI agents that help improve the Facebook algorithm.

WhatsApp and Messengers

Meta views business AI as a key long-term opportunity, with the vision that every business will eventually have an AI assistant. The company is seeing early product-market fit for these AIs in several countries and is integrating them directly into ads on Facebook and Instagram, as well as e-commerce websites. WhatsApp is becoming the largest driver of queries for Meta AI, serving as an increasingly important point of contact for businesses. Its monetisation will be a slow, multi-year process with no significant near-term revenue boost.

Ads have begun to roll out gradually in WhatsApp Status and Channels, but they are expected to have a lower average price than ads on Facebook or Instagram due to a user base concentrated in lower-monetising regions and limited ad targeting data.

The company is seeing strong momentum in business messaging, with click-to-message revenue growing over 40% year-on-year in Q2 2025 in the US. On a separate note, Meta tested but ultimately decided not to move forward with ads in the Messenger inbox.

Threads

Meta has successfully integrated large language models into the Threads recommendation system. As a result, users are spending more on time on the platform. The company has begun rolling out video and image ads within Feed on the platform globally. However, ad supply remains low, and Threads is not expected to be a meaningful contributor to impression growth or revenue in the near term. Meta remains optimistic about the long-term monetisation opportunity as the community and engagement continue to grow.

Meta AI

Meta AI is powered by Llama. The standalone app has over a billion monthly active users and is available over the globe. It has been providing users with more engagement and deepening experience. User retention is high while the number of users continue to increase.

Meta AI helps with content discovery on Facebook. Users ask Meta AI questions about posts in their Feed and leverage the software to find content on the platform. The company is also working on new features including automatic translation and dubbing of foreign-language content.

Reality Labs

Consumer demand for Reality Labs’ products remains strong, with Ray-Ban Meta glasses sales outpacing supply despite ongoing production ramp-ups. The number of users in the Quest ecosystem is also growing, as they spend more time on their devices for cloud gaming, media, and web-browsing. The company continues to expand its product line with recent launches like the Oakley Meta HSTN and the Meta Quest 3S Xbox Edition. Mark Zuckerberg remains committed to his vision of smart glasses as the ideal future form factor for AI, believing that not having AI glasses will lead to a significant disadvantage.

Key analyst questions

Meta’s CapEx for 2026 will be driven primarily by infrastructure costs and investments in AI talent to scale its generative AI capacity. The company is focused on using this compute power for its own products (with fungibility in mind), like the ad recommendation engine, rather than leasing it out like a cloud provider, believing this approach will yield a much higher return. While the company’s approach to open sourcing its models has become more cautious due to competitive and safety concerns, it remains committed to the practice.

The company is also in the early stages of expanding Business AIs across its messaging, ads, and websites, though it acknowledges challenges in scaling these efforts. It is developing a ‘turnkey solution’ in emerging markets like Mexico and the Philippines to help businesses with lead generation and customer service. Additionally, it is testing the integration of AIs within ads on Feed, Reels, and Stories to help users ask questions and make purchases without leaving the app. In the U.S., Meta has also begun testing a single ‘one agent’ that can seamlessly support businesses across all platforms, including their own websites.

The regulatory landscape is evolving, particularly in the EU, where the Digital Markets Act could significantly impact its business. Potential modifications to its less personalised ads offering could lead to a materially worse user and advertiser experience, which may have a significant negative impact on its European revenue as early as later this quarter.

The fifth perspective

Meta continues to scale its AI capacity with a focus on both efficiency and a strong return on investment. The company acknowledges that while generative AI is not expected to be a meaningful driver of near-term revenue, it remains highly optimistic about its long-term monetisation potential, following a deliberate “scale first, monetise later” playbook.