Meta’s Q3 earnings report and call clearly spotlighted the ongoing challenges facing its Reality Labs. The division posted an operating loss of $4.43 billion for the quarter, consistent with prior periods and contributing to cumulative losses well over $70 billion since 2021.

While revenue grew 74% YoY to $470 million, driven by Quest headset pre-stocking and strong early demand for AI-enhanced Ray-Ban Meta smart glasses, management explicitly guided for a YoY revenue decline in Q4. This headwind stems from lapping the prior year’s Quest 3S launch and the absence of new virtual reality (VR) headset releases in 2025.

In addition to the headline revenue and EPS figures, investors will zero in on several key areas during Meta’s Q4 2025 earnings report. These build on the momentum from Q3’s strong ad-driven performance while grappling with the company’s massive AI infrastructure buildout and ongoing Reality Labs challenges.

Advertising remains the core engine, with family of apps ad revenue surging 26% YoY in Q3 to around $50.1 billion. The market will watch closely for sustained momentum in Q4, especially given holiday-season tailwinds and AI-powered enhancements to ad targeting, ranking, and conversions.

Family DAP averaged 3.54 billion in Q3, up 8% YoY, fuelled by video strength (particularly Reels) and healthy non-video growth. Investors will look for further expansion in user time spent, especially in the US, where time on Facebook and Instagram grew double digits, and updates on how AI-driven recommendations continue boosting engagement across apps.

AI is now front and centre, with Meta Superintelligence Labs off to a strong start and heavy emphasis on next-generation models, compute infrastructure, and multimodal capabilities – including augmented reality (AR) glasses as data-capture tools. The market will seek concrete evidence of monetisation progress, such as AI improving ad performance, user retention, and features like Reels watch time, while assessing whether these investments are translating into measurable return on investment (ROI) amid the aggressive spending ramp.

Meta raised full-year 2025 capex guidance to $70 billion – $72 billion (up from prior ranges), driven primarily by AI infrastructure (data centres, hardware, and cloud). Q4 will include scrutiny of any hints about 2026 spending, which management has flagged as ‘notably larger’ in dollar growth terms, plus total expenses projected at $116 billion -$118 billion for 2025 (22% – 24% YoY growth).

This division continues to be a cash burn story as mentioned above. Guidance already flags a YoY revenue headwind in Q4 (due to lapping the Quest 3S launch and holiday stocking shifts), so expect details on losses, progress with AR glasses (strong early sell-outs), and any strategic pivots or budget adjustments for 2026, as AI increasingly takes priority over pure metaverse bets.

Beyond the numbers, the real market mover will be updated outlooks for 2026, covering revenue trends, expense acceleration, capex trajectory, AI ROI signals, and any shifts in Reality Labs strategy. With consensus already baking in solid growth, any surprises on spending intensity or AI payoff could drive volatility.

Meta has a TipRanks Smart Score of 8 ‘outperform’ and is rated as a ‘strong buy‘ by analysts, with 37 ‘buy’, 6 ‘hold’, and 1 ‘sell’ recommendations as of 20 January 2026.