Meta's AI Bet Faces Its First Big Earnings Test
Wednesday's report will show whether the buzz around Meta's Muse assistant is translating into business results worth a capex budget that could nearly double next year.
Meta reports third-quarter earnings after the bell on Wednesday, and this one carries more weight than usual. The company just had its best month on Wall Street since 2022, driven largely by enthusiasm for Muse, the AI personal assistant it launched in September. Now investors get to see whether that enthusiasm shows up in the actual numbers.
Analysts polled by LSEG expect earnings per share of $5.75 on revenue of $63.2 billion. Those are the headline figures, but they're not really what this quarter is about. The real story is spending, and whether Meta's AI push is starting to look like a business rather than a bet.
Muse debuted in September and quickly climbed to the top of Apple's iOS App Store. It's not a novel idea on its own. Digital assistants that sort your inbox or hunt down a deal on headphones already exist. What's notable is the distribution: Meta can push a tool like this out through Facebook and Instagram, putting AI agents in front of an audience most competitors can't match. The company hasn't slowed down since launch, either. Alexandr Wang, Meta's AI chief, has kept new foundation models and updates coming at a fast pace, including Muse Wonder, which rolled out just last Monday.
The capex question looms largest
Wall Street's biggest focus Wednesday won't be Muse's download numbers. It'll be capital expenditures, the money Meta pours into data centers and the computing infrastructure that makes AI agents and foundation models actually run.
Back in July, during its second-quarter report, Meta narrowed its 2026 capex guidance to a range of $130 billion to $145 billion, a $5 billion bump to the low end of what it had previously projected. That spending has a cost beyond the balance sheet line item: Meta's free cash flow in that quarter fell to $784 million, down from $8.55 billion in the same period a year earlier. That's roughly a 91% drop in free cash flow, driven almost entirely by how much the company is plowing into infrastructure.
And the spending isn't slowing down. FactSet analysts expect Meta's capex to climb to $196.3 billion in 2027. If that holds, it would mark a significant jump from this year's already elevated range, underscoring just how expensive it's becoming to compete at the frontier of AI development.
That raises the obvious question for Wednesday's call: does Meta raise its capex guidance again, and if so, by how much? Investors have tolerated heavy AI spending across the industry for a while now, but there's a growing appetite for evidence that the money is converting into revenue, not just infrastructure for infrastructure's sake.
User growth, flat but steady
On the audience side, StreetAccount expects Meta's daily active people, or DAP, to land at 3.65 billion for the quarter, essentially flat versus the prior three months. DAP is Meta's measure of unique users across its full app family, including Facebook and Instagram, so it's the broadest gauge of how many people are actually touching a Meta product on a given day.
Flat isn't alarming at this scale. Meta's user base is already enormous, and modest, steady growth is typical for a platform this mature. But it does mean the company's near-term growth story has to come from somewhere other than adding fresh eyeballs. That's exactly why AI tools like Muse matter to the pitch: the bet is that deeper engagement and new monetizable features, not a bigger user count, drive the next leg of revenue.
What to watch
Wednesday's report will be judged less on whether Meta beats the consensus EPS and revenue numbers and more on the story around them. Does management raise capex guidance further given the FactSet projection for 2027? Does Meta offer any concrete signal on how Muse, or the broader AI agent push, is contributing to revenue rather than just app store rankings? And does the company give any indication that the free cash flow squeeze seen last quarter is a temporary phase of heavy building rather than a new normal?
For a company that just had its best Wall Street month in years off the strength of a consumer AI product, Wednesday is the moment where sentiment either gets validated with numbers or has to wait another quarter for proof.
