Subscribe
Share
Share
Embed
Around the Desk: This is where we at Avory think out loud, challenge narratives, and look for signal through the noise. Each episode, the Avory & Co. team dives into what’s moving markets, how companies are performing, and where opportunities may be forming. We break down earnings, macro trends, and investor sentiment — all from the lens of a concentrated, high-conviction portfolio.
*** The views expressed on Avory Podcast: Around the Desk are those of the hosts and guests and do not constitute investment advice. This podcast is for informational purposes only and should not be relied upon to make investment decisions. All investments involve risk, including potential loss of capital. Avory & Co. may hold positions in the companies discussed.
All right.
Welcome back to around the desk where
we dig into markets, companies, and
big questions behind the numbers.
This is a post.
Mortem edition.
So short, quick, simple to the point.
I'm Sean Emery, chief Investment
Officer, co-founder at Avery and Company,
uh, and asset manager here in Miami.
So let's get into the topic.
You know, metaverse 2.0,
meta post-mortem.
Today's topic is really just
around Meta's Q3, uh, 2025.
Earnings revenue was
up 26% year over year.
The street was low twenties, so a big.
Beat on that end buy side was somewhere
around, you know, a little higher than
kind of consensus on the sell side.
You know, the biggest acceleration
here among any of the mega caps in
terms of growth outside of Nvidia, of
course, uh, the stock fell on the news.
So what's happening here?
You know, first.
Let's talk about some of the numbers in
general, some of the engagement metrics.
Medicaid and strong, really
strong report overall, 51.2
billion in revenue.
Up 26% ad impressions up 14%
and price per ads up 10%.
So healthy numbers across the board.
If we look at some engagement metrics,
you know, time spent across Facebook,
Instagram was up double digits.
Engagement metrics also
accelerating, not slowing.
Very, very key to the story here.
As we move on, if you
look at user numbers.
You saw a family of app users
now hitting, you know, 3.54
billion people, and that's growing 8%.
So growing 8% on such a large
number half of the world.
That's, you know, a astonishing figure.
And again, half the
planet engaging in meta.
You know, what seems like every
month across, you know, Facebook,
Instagram, WhatsApp, threads.
Um, and the entire ecosystem,
and yet the focus isn't on
growth after this earnings call.
It's really on the spend.
So let's dive into that quickly.
Operating expenses now, somewhere
around one 16 to one 18.
So one 17 billion at the midpoint.
That was guidance.
And then CapEx moved up.
Uh, they moved up the, the lower
end from 66 to 70 and kept the,
the top end there at 72 billion.
So at the midpoint, you're talking CapEx.
For the full year at 71 billion,
this somewhat implies again, forward
going into 2026, approaching.
If we keep, you know, some sort of linear
growth rate here, a hundred billion
dollars in 2026, I think the streets,
you know, closer to 98, uh, management.
I think this is where it got a little
bit, um, questionable in terms of what
people were looking at is, you know,
they highlighted how CapEx will be,
notably, larger expenses will grow
significantly faster, so typically.
I would say six months ago,
you got credit for that.
Uh, specifically on the CapEx
side, on the AI CapEx side.
This time, I think that's where
investors may have hit a pause.
Again, this is short-term versus long-term
thinking, but you know, I was just on
Bloomberg TV earlier, uh, today on this
recording, and they asked the question.
Everyone's thinking, you know,
is, is this kind of the metaverse.
Story where, you know, if you think of
the last time they were in hyper spending
mode, the market punished them for that.
It may have left a mental scar,
but I think a scar that's not
warranted, and I'll talk about why.
So are we repeating kind of history
here and you know, yes and no.
Yes.
Meaning we're spending no
meaning the implications.
But back then meta was
all in on the metaverse.
A visionary probably early on that bet.
You know, with limited ROI totally fine,
depending on the environment This time,
they're going all in on AI infrastructure,
different technologies, similar
narrative, heavy spend, uncertain payoff.
I think here's where
distinction, you know, matters.
In that view.
Meta is seeing returns.
Um, I'm making that clear.
You just look at the numbers,
turn on the tape, and you can
see that meta is seeing returns.
Uh, you know, they're embedding AI across
everything from the personalized feeds
to automated ad generation, to creative
optimization, to the recommendation
engines, their AI advantage.
You know, product, to put some
context, is now running at 60
billion annualized revenue run rate.
Advertisers are seeing
14% lower cost per lead.
In my world, you know, that's real
return on investment, not theoretical.
So that's, that's important
to, uh, to, to think about.
Now the question though is, you
know, why is the market potentially
reacting, you know, differently now?
Um, to the increased expense relative
to, let's say six months ago.
I think the issue isn't, you know, the,
the fact that they don't believe in
ai, uh, you know, you look across the
market, you know, anything that is AI
related has been working to some degree.
Most of that, you know, gravitating
towards, you know, Nvidia, let's say
it's that meta seems to have removed the
ceiling on spend, and ultimately I think
that is the only point here that matters.
You know, Zuckerberg said directly, he'll
invest as much as it takes to lead an
AI and in investor language, you know,
that means near term ROI discipline,
you know, somewhat out the door.
We've seen this playbook before though.
You know, you go back and you think of
like, you know, Waymo, which was once
criticized for being a science project,
now leading an autonomous and now
they're getting some credit for that.
The difference though is, you know,
alphabet's CapEx obviously didn't double
overnight, and again, it's all about
that ceiling that seemingly got removed.
Uh, from Mark's terminology as opposed to.
Uh, what was given, which was
guidance, and they, they, they,
uh, capped the ceiling on that.
Uh, so I think that's why we're
seeing maybe some pushback.
But, you know, if we're being fair,
you know, meta is executing revenue
growth of 26%, again, second only
to Nvidia, among the large caps
and reme, remember, they sell ads.
They don't sell AI infrastructure
in an AI frenzy, so they're selling
ads in an environment where.
Everyone says the consumer's weak
advertisers are spending more on meta.
I don't think that happens because
people suddenly love meta again.
Uh, I think it happens because
the engine is improving.
Better personalization again,
better recommendation systems,
better advertiser, ROI, that's AI
infrastructure paying off in real time.
That should be the focus.
If you are a midterm long-term
investor, even a short-term investor,
26% growth in a consumer ad market.
I don't know how that distinction
is, is not clear that, you know,
something is, is, um, driving that.
So while the ROI, let's say on like their
AI glasses and some of those other things
are, are still early on, even though Mark
on the, on the call did hint to the point
that their new Orion's could be profitable
at some point in the near future.
Their AI glasses with Luxottica
are performing very well.
They get sold out really quick.
Um, so there's a lot to like there as
well, but a much smaller business relative
to the size of their monster ad business.
The, you know, the broader
point, you know, I've been
talking a lot about this lately.
You know, the biggest near
term risk to markets isn't
geopolitics or even the consumer.
It's CapEx discipline.
All this AI spending will start to
flow through income statements soon.
Those budgets, you know, as they rise,
the revenue growth needs to justify
it, and it just gets harder over time
as you continue to ratchet that up.
You know, if the market starts
pushing back on CapEx at all
costs, you know, we could see
ripple effects downstream from a.
Clearly the hyperscalers to the chip
makers to power and data center,
you know, infrastructure plays.
So the question is, you know, are
we starting to see that shift?
Maybe, you know, but right
now, I, I still think it's all
systems go for the AI investment.
You listen to AWS, you listen to
anyone in the ecosystem, it doesn't
sound like anyone's slowing down.
You know, if the market does, you
know, force them to slow down.
I think you could see that.
But look, metas story is on fire.
That's the reality.
26% growth, uh, the company in
theory, you know, there's nothing
wrong with this story at all.
You know, they're.
No longer maybe being in, um,
rewarded for some of this CapEx
spend here in the short term.
But again, they have to justify
it with continued growth.
And, and, you know, the irony of all
this is the, the, their core business has
never been stronger, but the market is
asking, you know, how much is too much?
And that, I think, is the clear takeaway.
And this postmortem for meta.
I'll see you later.