Meta Revenue Beat Lifts Shares as AI Spending and Legal Costs Draw Focus

Key Takeaways

• Q3 revenue rose 26% year on year to $64.60 billion, exceeding the $63.34 billion consensus estimate.
• Ad impressions increased 10% and average ad prices rose 14%.
• Capital spending totalled $34.91 billion, while free cash flow was negative $2.12 billion.
• Management expects Q4 revenue of $73 billion–$76 billion and annual capital expenditure of $135 billion–$145 billion.
• Traders are watching resistance at $707–$708 and initial support at $693–$694.

Meta reported stronger-than-expected third-quarter revenue and shares advanced in after-hours trading following the October 21 release. However, reported net income of $9.86 billion reflected a $9.89 billion settlement charge, leaving investors weighing the revenue beat against weaker earnings.

Why Traders Are Watching Meta

Meta’s results give traders two competing signals. Advertising momentum supports the growth case, but the scale of infrastructure investment raises the hurdle for future returns.

Higher impressions and pricing point to resilient ad demand. At the same time, negative free cash flow and a larger spending outlook have investors asking whether the advertising business can fund Meta’s expanding AI ambitions.

Legal exposure adds further uncertainty. Beyond the settlement charge, the company faces a reported $25 billion New Mexico privacy judgment.

Key factors influencing META include:

• Advertising growth: Impression and pricing trends will help determine whether recent momentum continues.
• Infrastructure spending: Q3 capital expenditure reached $34.91 billion, with annual guidance of $135 billion–$145 billion.
• Cash generation: Stronger engagement and ad performance would be more persuasive if accompanied by improving free cash flow.
• Legal costs: Settlements and the reported New Mexico judgment could add to financial pressure.

Key Trading Levels

Shares have pulled back from $707–$708 towards $696.38. An earlier rebound from around $691 stalled near $704–$705, followed by renewed selling beneath the nine-period moving average, and selling volume rose into the final visible decline.

The $700 area is the immediate pivot. Trading back above it would bring the $702–$703 and $704–$705 resistance zones into focus, with $707–$708 in view if momentum extends. A failed retest and renewed selling beneath $700 would weaken that setup.

On the downside, $693–$694 is the first support level, where earlier selling stabilised. A decisive break below it, particularly on rising volume, could bring $691–$692 into focus. A rapid recovery into the range would raise the risk of a false breakdown, and a sustained move through $702–$703 would weaken the bearish case.

Meta Outlook: Can Advertising Strength Fund the AI Build-Out?

Meta’s next sustained move will likely depend on whether confidence in AI returns outweighs concerns over spending and legal costs.

Resilient advertising demand, better monetisation and evidence that infrastructure investment is lifting cash generation could support a recovery. More predictable spending plans could also help investors assess the earnings outlook.

However, weaker ad growth, further increases in investment requirements or additional legal costs could limit rallies. Pressure could intensify if revenue remains strong but cash generation fails to improve.

For a deeper analysis of Meta’s earnings, technical levels and AI investment outlook, read this article.