Goldman Sachs Reviews Meta (META.US) Q3 Earnings Report: AI Continues to Empower Core Businesses and Maintain “Buy” Ratings

The Zhitong Finance App learned that Goldman Sachs released a preliminary review after Meta Platforms (META.US) released its financial report for the third quarter of fiscal year 2026, saying that the market's initial reaction to this financial report is expected to be positive because the company's revenue not only exceeded expectations, but also exceeded the high-end of the company's guidance range. Among them, advertising revenue increased 26% year over year. However, GAAP profitability was clearly hampered by a $9.9 billion one-time accrual project. The accrual program is related to Meta and multi-state US attorneys general reaching an agreement to resolve lawsuits related to youth mental health and social media. Goldman Sachs pointed out that if this fee were excluded, the company's profit level would exceed the agreed expectations of Goldman Sachs and Visible Alpha.

Goldman Sachs maintained Meta's “buy” rating in the report, with a 12-month target price of $860.

Goldman Sachs analysts led by Eric Sheridan said that specifically, Meta's total revenue for the third quarter was US$64.60 billion, higher than Goldman Sachs's forecast of US$63.70 billion and Visible Alpha's unanimous estimate of US$63.47 billion, and exceeded the company's US$61 billion to US$64 billion guidance limit, an increase of 26% over the previous year.

Among them, Family of Apps revenue was US$64.16 billion, up 26% year over year; Reality Labs revenue was US$443 million, up 6% year over year. Within Family of Apps, ad revenue totaled US$63.06 billion, up 26% year over year, and also increased 26% at a fixed exchange rate, higher than Goldman Sachs's previous forecast of 23.7%. By region, advertising revenue in the US and Canada is 28.44 billion US dollars, Europe is 14.23 billion US dollars, Asia is 11.53 billion US dollars, and the rest of the world is 8.86 billion US dollars. The total number of daily active users in the third quarter was 3.64 billion.

In terms of profit, Meta's GAAP operating profit for the third quarter was US$12.99 billion, lower than Goldman Sachs's forecast of US$19.38 billion and Wall Street's estimate of US$17.67 billion, and the consolidated GAAP operating margin was 20%. By business, Family of Apps had an operating profit of US$17.12 billion, with a profit margin of 27%; Reality Labs had an operating loss of US$4.13 billion. GAAP earnings per share for the third quarter were $3.83, below Goldman Sachs' forecast of $6.49 and Wall Street's estimate of $5.77.

In terms of guidance, Meta expects total revenue for the fourth quarter to be 73 billion to 76 billion US dollars. Compared with Goldman Sachs's forecast of 74.59 billion US dollars and Wall Street's forecast of 73.6 billion US dollars, the exchange rate is expected to bring about 100 basis points of headwinds compared to the same period last year. The company expects total GAAP expenses of $175 billion to $179 billion for fiscal year 2026, higher than Goldman Sachs's forecast of $168.47 billion, Wall Street's estimate of $169.29 billion, and previous guidance of $165 billion to $169 billion; capital expenditure for the 2026 fiscal year is expected to be $135 billion to $145 billion, compared with Goldman Sachs's forecast of US$142.94 billion, Wall Street's forecast of US$139.74 billion, and previous guidance of US$130 billion to 145 billion US dollars.

Goldman Sachs said that among the many topics disclosed in the financial report, investors are expected to focus on three major directions: first, the operating rate of advertising revenue, including absolute amount and growth rate, as Meta management continues to emphasize the application of AI computing power to core operations as a driving factor for continued growth; second, the number of full-time employees decreased by about 12% month-on-month and 15% year-on-year during the quarter; third, reality Labs' losses narrowed year-on-year in 2026, and the initial guidance framework for further narrowing in 2027.

Looking ahead to the longer term, Meta management gave a positive qualitative statement on the large-scale implementation of the AI business, including the impact on core operations, but at the same time stated that it will continue to maintain a high level of investment in the future and has not directly quantified the scale of investment.