Meta's strong earnings sent its stock soaring after hours as CEO Mark Zuckerberg detailed the company's all-in approach to the AI race.
The company also made it clear that competing in the AI talent war comes with a hefty price tag.
Meta's second-quarter results handily beat analysts' estimates for revenue and earnings per share. Revenue was $47.52 billion, compared to expectations of $44.83 billion. Earnings per share were $7.14, compared to estimates of $5.89.
Meta shares were up over 12% in after-hours trading during the analyst call, hitting $780, which would represent an all-time high for the stock.
In a reference to Meta's recent AI hiring spree, the company cited employee compensation for "technical talent in priority areas" as its second-largest driver in cost growth, behind infrastructure expenses.
Zuckerberg took a bit of a victory lap after the launch of his new Superintelligence Lab, which is run by Scale AI founder Alexandr Wang a hiring made possible by Meta's eye-watering $15 billion investment in the startup.
"We're building an elite, talent-dense team," he said. "I've spent a lot of time building this team this quarter." He also referenced the hiring of ex-OpenAI researcher Shengjia Zhao, now chief scientist of Meta's Superintelligence Labs, and former GitHub CEO Nat Friedman.
The Meta CEO is also clearly bullish on the idea of leaner AI divisions, praising "the ability for small talent, dense teams to be the optimal configuration for driving frontier research."
The company also gave updates on its hit AI Ray-Bans, sales of which are "accelerating" and helped drive a revenue increase of nearly 5% for the Reality Labs division.
Zuckerberg said that glasses will be "the ideal form factor for AI," echoing his vision he outlined in a letter earlier in the day about "personal superintelligence."
On the advertising front, Meta CFO Susan Li said that nearly 2 million advertisers have used the company's AI video generation and image tools.
"I think in the future, if you don't have glasses that have AI or some way to interact with AI, I think you'd probably be at a pretty significant cognitive disadvantage compared to other people," Zuckerberg says.
Glasses will be the "ideal way to blend the physical and digital worlds together," he predicts, mentioning the metaverse.
(Note: This appears to be the only mention of the "metaverse" in the earnings call; many people will remember when the metaverse was a big buzzword in Meta's earnings. Looks like that's "superintelligence" now.)
Zuckerberg talks about the smaller size of Meta's new Superintelligence Labs team.
It's an echo of what he's said about building lean teams focused on efficiency. He praises "the ability for small talent, dense teams to be the optimal configuration for driving frontier research."
It breaks from how the company operates in other divisions, he notes.
"If you look at like what we do in Instagram or Facebook or our ad system, we can very productively have many hundreds or 1000s of people basically working on improving those systems," he says. "But I think for this, for the leading research on superintelligence, you really want the smallest group that can hold the whole thing in their head."
"There's just a very high chance it seems like the world is going to look pretty different in a few years from now," Zuckerberg notes. "The more aggressive assumptions, or the fastest assumptions, have been the ones that have most accurately predicted what would happen."
The stock price hits $771 as questions with Wall Street analysts begin.
Li says the company continues to focus on head count growth in its "highest priority areas."
"We've had a particular emphasis on recruiting leading talent within the industry as we build out Meta Superintelligence Labs to accelerate our AI model development and product initiatives," she says.
Turning to AI-related infrastructure costs, Meta also expects to "ramp our investments significantly in 2026" for infrastructure.
CEO Mark Zuckerberg is on the call, along with CFO Susan Li.
"Meta's blowout earnings and raised guidance highlight how AI is becoming a real revenue driver, not just hype," said Jesse Cohen, senior analyst at Investing.com. "From ad targeting to content discovery, Meta is showing how to deploy AI at scale and Wall Street is rewarding it. The company's continued heavy investment in AI infrastructure signals it's playing the long game and betting big on foundational models and compute power."
Minda Smiley, senior analyst at EMARKETER, a sister company of Business Insider, said the company's strong quarter shows it "not only weathered but perhaps even benefitted from economic instability in recent months" and that the digital ads market more broadly "might not yet feel the pain from tariffs, though that could change."
And while Meta continues pouring money into its AI ambitions, "Meta's exorbitant spending on its AI visions will continue to draw questions and scrutiny from investors who are eager to see returns," Smiley said.
Those AI talent wars you've been reading about? They're real and expensive Meta says.
Not in those words, exactly. But that's clearly what the company is getting at in today's note to investors, where it acknowledged that all that spending is indeed going to show up on its financial statements.
"While we are still very early in planning for next year, there are a few factors we expect will provide meaningful upward pressure on our 2026 total expense growth rate," Meta said. "The largest single driver of growth will be infrastructure costs, driven by a sharp acceleration in depreciation expense growth and higher operating costs as we continue to scale up our infrastructure fleet."
"Aside from infrastructure, we expect the second largest driver of growth to be employee compensation as we add technical talent in priority areas," Meta added.
That said, Meta says its overall organization got smaller in the last quarter. It currently employs 75,945 people, down about 1% from the 76,834 it reported in Q1.
Peter Kafka
You can expect AI to be a heavy focus on this earnings call. (What else is new?) The company is allocating billions in capital expenditures toward infrastructure, talent, and other costs to support its AI ambitions.
Meta has been in an all-out talent war for the biggest names in AI, poaching some competitors from rival firms with million-dollar bonuses.
The company in June announced a new AI division called Superintelligence Labs. The company took a 49% stake in Scale AI for nearly $15 billion to make Scale founder Alexandr Wang Meta's new chief AI officer.
Sarah Jackson
Angelo Zino, an analyst at CFRA Research, wrote this month that investors will likely be most interested in three things heading into Meta's earnings call:
- The implications of the company's recent "AI hiring spree."
- The health of Meta's ad spending across its social media platforms.
- The company's monetization of AI and other growth initiatives.
Still, Zino said he expects Meta to meet its expected revenue targets for the second and third quarters, largely due to increased stability in the digital ad market.
CFRA reiterated its "Buy" rating on the stock and lifted its price target to $800 from $750, implying 12% upside from current levels.
Meta could lift its capital expenditures even higher as it ploughs more money into AI and superintelligence projects, analysts at Citizens wrote.
"With Meta making material investments in its superintelligence team, including researchers and compute, we believe the company is going through a significant investment cycle and we expect 2026 CapEx to surprise the Street as Meta builds multiple 1GQ or greater data centers," they said, estimating capex could come in around $91 billion next year.
Stocks typically don't benefit when a company is going through an investment cycle, analysts said, but the situation could be different for Meta, as AI can enhance the ad experience for users.
The firm reiterated its "Market Outperform" rating and $750 price target on the stock, implying 5% upside from current levels.
Oppenheimer said it sees a handful of risks looming for Meta stock.
- Meta could struggle to innovate its AI features. "Scout" and Maverick," the company's latest AI models for Llama 4, "have dramatically trailed peers," Oppenheimer said.
- Investors could sell Meta stock to divert proceeds to new tech IPOs.
- Meta's ads could become less effective if privacy restrictions make it difficult for the company to track user data
- The company faces competition from the likes of Google, Microsoft, Pinterest, Twitter, and TikTok.
Oppenheimer reiterated its "Outperform" rating on the stock and lifted its price target to $775 a share, implying 9% upside from current levels.
