00:00 Speaker A

Great as always to see you. Let let’s start off with meta here because I’m looking at the stock uh down about nearly six and a half percent here, Aaron. What do you make of the report? What do you think explains the disappointment here? At least initially?

00:15 Aaron

Yeah, could be a combination of the tax hit as you explained, uh kind of a one-time um in our review, um as well as I would say the expenses uh up a little bit both on operating expense guidance for the remainder of the year, um as well as the cap back slightly increased as well. Uh so that might be concerning for investors that may want to see some rationalization on the expense base and so we’ll have to look on the call for more disclosures there.

00:37 Aaron

But the top line was strong. I would say they beat on the revenues for the quarter, ad revenues. Uh the guidance for the quarter for Q4 also uh relatively strong although the largely in line with street expectations, but I would say revenue’s good, maybe some noise around some of the expense issues as well as the tax hit.

00:52 Speaker A

They are seeing that full-year CAPEX, just to put a number on here and it looks like they’re calling that out for between 70 to 72 billion. Is that roughly what you had pencilled in?

01:02 Aaron

Yeah, I wasn’t far off. Um, I believe last quarter it was 66 to 72. So a slight increase at the kind of the mid to high end of that range versus previously. I think investors want to hear on the call though in terms of kind of what this CAPEX is going to be used for. They talked about potentially cutting some of the expenses around AI in terms of head count. I think investors are still want to see what the ROI is on some of this CAPEX spend. It’s a little bit less clear for meta versus an Amazon or a Google who’s really spending that CAPEX on cloud given the strong demand those companies are seeing.

01:28 Speaker A

Some some bulls come on Aaron, and they said, listen, the CAPEX spend makes sense to them because they say, well we we see where, we see where AI is having an impact in this name, you know, we see it in the user engagement, we see it in the ad business. Do you see that?

01:41 Aaron

Definitely for the core business, we do think it makes a lot of sense continuing to spend CAPEX and AI for the core business. I think it’s, I think our point is on the non-core business, the super intelligence investments, less clear how they’re going to monetize that at this point. It’s obviously a multi-year plan as they talked about, but I think investors want to see a little bit more concrete data, concrete thoughts on exactly how they’re going to monetize some of these non-core areas.

02:00 Speaker A

So that having been said, Aaron, about listen, we got tax issues, expenses, CAPEX. Um having said that, you remain bullish on their name. You tell clients this one’s a buy. What are the catalysts ahead that you see here?

02:14 Aaron

Yeah, know, I still expect continued strong revenue growth. Um obviously another quarter of 20% plus ad growth we saw in Q3. Q4 guide implied another 20% growth. Uh we think it can grow mid teens, top line growth for advertising, um in 2026. And we think valuation is still undemanding. It does get a little bit uh more expensive if you look at it on a free cash flow basis given that CAPEX expense. So I think that’s maybe where investors have a little bit of hesitancy, but on our GAAP earnings basis, we think we had them doing around $30 of GAAP earnings in 2026. So a fairly reasonable valuation given their growth rates.

02:48 Speaker A

And so I guess you you, if you’re bullish on the name, then Aaron, you agree with Zach and you think, hey, listen, there’s a huge opportunity here, we got to invest to capture it, to capture that AI demand.

03:00 Aaron

Yeah, definitely. I think it’s the right move for now. At the same time, if they’re not seeing a good ROI or I think they need to have that option to pull back a little bit. and I don’t think investors will be displeased if they decide not to spend another 30, 40 billion next year incrementally on CAPEX. So so that’s the question I think investors just want a little bit more color. Are they getting a good ROI on that CAPEX spend?