Meta Platforms (META) delivered strong Q3 financials yesterday. Its quarterly result highlighted the resilience of its digital advertising business and the growing contribution of artificial intelligence (AI) to its monetization strategy, supporting Meta’s investment case.
Meta’s significant investment in AI infrastructure and capabilities will play a key role in driving solid revenue growth ahead. In addition, its Muse AI agent offers a path to expand engagement, improve ad effectiveness, and unlock new monetization opportunities.
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Wall Street is bullish on META stock as the technology giant’s AI investments are translating into tangible business benefits. Better content recommendations, higher user engagement, and more efficient advertising are helping Meta generate incremental ad revenue, strengthening the economic rationale for its substantial AI spending.
Accelerating advertising monetization could help offset concerns surrounding rising capital expenditures.
The Street’s highest price target for META stock stands at $1,050, representing about 62% upside over the next 12 months.
www.barchart.com AI Strengthens Meta’s Investment Case
Meta’s latest quarterly performance highlights how AI is becoming a meaningful driver of growth across its business. Strong advertising revenue, rising user engagement, and growing adoption of AI-powered tools suggest the company is beginning to translate its AI investments into tangible commercial benefits while creating new growth opportunities.
Meta’s Family of Apps advertising revenue increased 26% year-over-year (YoY) to $63.1 billion in Q3. This growth was supported by a 10% increase in ad impressions and a 14% rise in the average price per ad. Higher impressions reflect stronger user engagement, a growing user base, and improved ad placement across Meta’s platforms.
AI is helping Meta turn user engagement into revenue growth. Instagram recorded its highest-ever global time spent per user, with double-digit YoY growth across both Reels and Feed. Facebook Reels also reached record engagement levels in the U.S. and globally, while Threads saw time spent per user increase by more than 20% YoY. These gains reflect Meta’s progress in delivering more relevant content and keeping users engaged for longer.
The growing adoption of generative AI tools adds another layer to the growth, supporting its investment case. The company reported that nearly 10 million advertisers used at least one of Meta’s AI-powered creative tools in Q3, while adoption of its video-generation features increased 25% quarter-over-quarter.
Improvements across advertising, combined with continued advances in AI models and new product launches, are expected to support strong revenue growth through 2027. Meta is already seeing AI benefits in its core business, while its newer AI initiatives offer additional upside.
Beyond advertising, Meta is positioning AI as a new revenue opportunity. Its Muse personal agent has attracted over 10 million users in the U.S. and Canada in a short span, and management reports encouraging early engagement and retention.
The longer-term opportunity could be substantial for Muse. Meta already generates several hundred dollars in annual revenue per U.S. user across its existing Family of Apps business, according to management. It believes Muse could eventually generate even higher revenue per user, supported by the potential to facilitate commerce and connect users with relevant products and services.
Meta is also developing new AI-related businesses that management expects could begin contributing incremental revenue in 2027. Potential revenue streams include subscriptions, transaction fees, advertising, and enterprise solutions. These initiatives could gradually diversify Meta’s business and create additional growth avenues over time.
Overall, Meta’s investment case is becoming increasingly compelling as AI strengthens its existing business while opening up new avenues for growth.
META Stock to Hit $1,050
Despite the short-term noise on the price chart, Meta’s strong advertising growth and AI-driven monetization position it well to hit $1,050 soon, making it a buy. With AI enhancing engagement, improving ad efficiency, and creating new revenue opportunities, Meta appears well-positioned to sustain solid growth through 2027 and beyond, supporting upside in its stock price.
www.barchart.com On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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