Meta (META)

Social network operator Meta Platforms (NASDAQ:META) announced better-than-expected revenue in Q3 CY2025, with sales up 26.2% year on year to $51.24 billion. The company expects next quarter’s revenue to be around $57.5 billion, close to analysts’ estimates. Its GAAP profit of $1.05 per share was 84.3% below analysts’ consensus estimates.

Company Overview

Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Meta grew its sales at a solid 17.1% compounded annual growth rate. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.

This quarter, Meta reported robust year-on-year revenue growth of 26.2%, and its $51.24 billion of revenue topped Wall Street estimates by 3.4%. Company management is currently guiding for a 18.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.6% over the next 12 months, similar to its three-year rate. This projection is particularly noteworthy for a company of its scale and implies the market is forecasting success for its products and services.

User Growth

As a social network, Meta generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.

Over the last two years, Meta’s daily active people, a key performance metric for the company, increased by 6.4% annually to 3.54 billion in the latest quarter. This growth rate is slightly below average for a consumer internet business and is largely a function of its already massive scale and penetrated market. If Meta wants to reach the next level, it likely needs to innovate with new products.

In Q3, Meta added 250 million daily active people, leading to 7.6% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.

Revenue Per User

Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Meta’s audience and its ad-targeting capabilities.

Meta’s ARPU growth has been exceptional over the last two years, averaging 14.8%. Its ability to increase monetization while growing its daily active people demonstrates its platform’s value, as its users are spending significantly more than last year.

This quarter, Meta’s ARPU clocked in at $14.48. It grew by 17.3% year on year, faster than its daily active people.

A company’s gross profit margin has a significant impact on its ability to exert pricing power, develop new products, and invest in marketing. These factors can determine the winner in a competitive market.

For social network businesses like Meta, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include customer service, data center, and other infrastructure expenses.

Meta’s gross margin is one of the best in the consumer internet sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and marketing during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 81.8% gross margin over the last two years. Said differently, roughly $81.77 was left to spend on selling, marketing, and R&D for every $100 in revenue.

Meta produced a 82% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Consumer internet businesses like Meta grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

Meta is extremely efficient at acquiring new users, spending only 7.6% of its gross profit on sales and marketing expenses over the last year. This efficiency indicates that it has a highly differentiated product offering and strong brand reputation from scale, giving Meta the freedom to invest its resources into new growth initiatives while maintaining optionality.

Meta has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 61%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Meta’s EBITDA margin rose by 14.9 percentage points over the last few years, as its sales growth gave it operating leverage.

In Q3, Meta generated an EBITDA margin profit margin of 60.6%, down 2.6 percentage points year on year. Since Meta’s EBITDA margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Diving into Meta’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Meta’s EBITDA margin declined this quarter but expanded by 14.9 percentage points over the last three years. Its share count also shrank by 4.3%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q3, Meta reported EPS of $1.05, down from $6.03 in the same quarter last year. Tthe third quarter 2025 provision for income taxes includes a one-time, non-cash income tax charge of $15.93 billion and Diluted EPS would have increased by to $7.25, compared to the reported diluted EPS of $1.05. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Meta’s full-year EPS of $22.64 to grow 29.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Meta has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging 26.9% over the last two years.

Meta’s free cash flow clocked in at $10.63 billion in Q3, equivalent to a 20.7% margin. The company’s cash profitability regressed as it was 17.5 percentage points lower than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

Big corporations like Meta are attractive to many investors in times of instability thanks to their fortress balance sheets that buffer pockets of soft demand.

Meta is a profitable, well-capitalized company with $44.45 billion of cash and $28.83 billion of debt on its balance sheet. This $15.61 billion net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Meta beat analysts’ revenue expectations this quarter. EPS would have also beat excluding a one-time, non-cash income tax charge of $15.93 billion. Looking ahead, revenue guidance was just in line. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 6.4% to $703.81 immediately following the results.

Updated: December 4, 2025 at 9:09 PM EST

When considering an investment in Meta, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

There are several reasons why we think Meta is a great business. To begin with, its revenue growth was solid over the last three years, and its growth over the next 12 months is expected to accelerate. And while its projected EPS for the next year is lacking, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. On top of that, Meta’s impressive EBITDA margins show it has a highly efficient business model.

Meta’s EV/EBITDA ratio based on the next 12 months is 12.4x. Analyzing the consumer internet landscape today, Meta’s positive attributes shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $839.10 on the company (compared to the current share price of $662.52), implying they see 26.7% upside in buying Meta in the short term.