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 disagreement lies in whether the company can strike a balance between 2027 capital expenditure and AI monetization 鈥?a question that will determine how the stock moves after the report.
According to Bank of America Securities analyst Justin Post, Meta's third-quarter revenue is expected to come in at about $63.8 billion, slightly above the consensus estimate of $63.3 billion. The core basis for this view is healthy growth shown in channel checks of the advertising market. Bank of America maintains a Buy rating on Meta and an $810 price target.
Beyond the current-quarter results, the spending path for 2027 is the true focus of this earnings report. Meta faces a one-time $10 billion state attorneys general settlement accrual, which will push third-quarter GAAP operating income down to $11.5 billion, far below the market's $18.6 billion estimate; EPS will also fall to $3.79, compared with the market's $6.08 estimate. Excluding this non-recurring item, Bank of America estimates profitability 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 pressure on the stock cannot be ignored.
Revenue side: ad checks provide support
The logic for a revenue beat in this quarter's report is relatively clear. Justin Post noted that channel checks from the advertising market were fairly solid, supporting Bank of America's above-consensus revenue forecast. Bank of America estimates $63.8 billion, slightly above the Street's $63.3 billion estimate, and the analyst believes the market's implied expectation may already be close to $64 billion.
From the options market, the implied move for Meta's earnings is about 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. Data from Bank of America's derivatives team shows Meta's implied volatility score ranks low in long/short screens, reflecting a market that is generally optimistic about the quarter's results and not expecting enough volatility.
GAAP profit distortion: impact of the one-time settlement accrual
This quarter's GAAP profit figure will be clearly distorted by a one-time item.
Meta previously announced that, due to the "youth protection" litigation, the company will record $10 billion in third-quarter charges related to a settlement with state attorneys general. Bank of America expects this to push third-quarter GAAP operating income down to about $11.5 billion, sharply below the market consensus of $18.6 billion; accordingly, GAAP EPS is expected to be $3.79, while the consensus estimate is $6.08.
Bank of America stressed that excluding this non-recurring accrual, the company's profitability is actually above consensus, 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
The market does not differ much on current-quarter revenue. What is really making investors nervous is the medium-term spending path.
Bank of America analysts listed the main risks for this earnings call: first, management hints that there is further upside room for 2027 capital expenditure or operating expenses; second, delays in the AI monetization timeline 鈥?AI products such as Muse will consume a large amount of computing resources in the near term but have not yet generated direct revenue contributions.
The analyst expects Meta will not provide formal 2027 capital expenditure guidance on this call, but may offer a qualitative framework.
From a broader perspective, Bank of America equity strategist Savita Subramanian noted that this year the capital expenditure growth of tech giants has exceeded revenue growth by about 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 Meta's conference call undermines that assumption, it will create substantial valuation pressure.
Conference call focus: AI progress and monetization path
In addition to the spending issue, analysts expect the call to focus on several areas: Muse's user adoption rate and token cost per user, enterprise AI opportunities, and large language model and infrastructure strategy.
Potential positive catalysts include: an additional boost to the advertising business from AI, disclosure of user traction data for new AI products, and outlook commentary on improved infrastructure efficiency. Potential risks come from soft fourth-quarter guidance due to the macroeconomic environment, foreign exchange, or diminishing marginal AI benefits, as well as a lack of clarity on the 2027 AI monetization path.
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