Meta Platforms is set to report its third-quarter earnings on Wednesday, and all eyes are on whether the company's aggressive artificial intelligence spending is finally translating into revenue beyond its core advertising business. Analysts project capital expenditures will more than double year-over-year to $41.68 billion in the September quarter, a staggering figure that underscores the scale of Meta's AI bet.
The company has been pouring billions into AI infrastructure, from data centers to custom chips, and is now rolling out consumer-facing products like the subscription-based Muse assistant. Early demand for Muse, along with other AI-driven tools, is being closely watched as a potential new revenue stream. But the big question remains: can these offerings meaningfully diversify Meta's income, which still relies overwhelmingly on digital ads?
The AI spending surge
Meta's capital expenditure guidance has been climbing steadily throughout the year, and the Q3 figure of $41.68 billion represents a dramatic jump from the same period last year. This spending is largely directed at building out the computing power needed to train and run advanced AI models, as well as integrating AI features across its family of apps, including Facebook, Instagram, and WhatsApp.
The company has said it expects capital expenditures to continue rising in 2025, and investors are growing increasingly sensitive to the gap between AI investment and visible returns. For a company that has historically generated most of its revenue from advertising, the shift toward AI is a strategic pivot that carries both promise and risk.
Meta's situation is not unique. Across the tech sector, companies are racing to deploy AI, and analysts have been lifting profit forecasts as they try to gauge the long-term payoff. But Meta's scale makes it a bellwether for whether AI spending can be justified to shareholders.
Muse and the push beyond ads
One of the most anticipated developments is the performance of Muse, Meta's subscription-based AI assistant. Launched earlier this year, Muse is designed to help users with tasks like drafting messages, generating images, and answering questions. It's part of Meta's broader effort to create consumer AI products that can generate recurring revenue, similar to how other tech companies have monetized AI assistants.
Early demand for Muse has been described as encouraging, but the company has not yet disclosed specific subscriber numbers or revenue figures. Analysts will be looking for any hints in the earnings call about how many users are paying for the service and whether it's on track to become a meaningful business line.
Beyond Muse, Meta has been integrating AI into its advertising tools, helping advertisers create more effective campaigns. This could indirectly boost ad revenue, but it doesn't represent the kind of diversification that investors are hoping to see.
What it means for investors
For everyday investors, Meta's earnings report is more than just a single company's numbers. It's a test case for the entire AI investment thesis. If Meta can show that its AI spending is starting to generate returns, it could validate the high valuations of AI-focused tech stocks. If not, it could raise doubts about the sustainability of such massive capital outlays.
The broader market context matters too. A large portion of the S&P 500's expected profits now hinge on growth in the 2030s, which means investors are betting on long-term AI adoption. Meta's results will provide a near-term data point on whether that bet is paying off.
Investors should also keep an eye on Meta's guidance for the holiday quarter, which is typically the strongest for advertising. Any weakness there could signal broader economic concerns, especially with inflation data still influencing central bank policy around the world.
Meta's stock has been volatile this year, swinging with each piece of AI news. The earnings report could trigger significant moves, so investors should be prepared for potential volatility.
The bottom line
Meta's Q3 report is a pivotal moment for the company and for the AI investment narrative. The doubling of capital expenditures shows that Meta is all-in on AI, but the market wants to see evidence that this spending will eventually lead to substantial revenue growth beyond ads. Whether Muse and other AI tools can deliver that remains the key question.
For now, investors will be parsing the earnings call for any clues about subscriber growth, ad pricing power, and management's confidence in the AI roadmap. The answers will not only shape Meta's stock price but also influence how the market views AI spending across the tech sector.
