Meta Earnings Preview: Muse, AI Capex and Q3 Outlook

• Meta reports Wednesday, October 21, after the close. Analysts expect about $63.3 billion in revenue, comfortably inside the company’s $61 billion to $64 billion guidance range.

• Bank of America lowered its Q3 EPS forecast to $3.79 from $7.08 to account for a roughly $10 billion legal accrual tied to a multistate settlement. Headline EPS could look weak even if operations are solid.
• Meta rallied about 27% in September after launching its Muse AI agent, its strongest month since November 2022.
• Meta expects 2026 capex of $130 billion to $145 billion and total expenses of $165 billion to $169 billion. Analysts already model around $193 billion in capex for 2027.
• Cash flow is the pressure point. Q2 capex of $31.1 billion absorbed nearly all of the quarter’s operating cash flow, leaving just $784 million in free cash flow.

Meta Earnings Preview - October 2026

Meta Platforms (NASDAQ: META) has been among the most volatile names in the AI trade. After a weak spring, the stock climbed nearly 32% between the June 30 close and mid-October, powered largely by enthusiasm around Muse. It has pulled back since, trading near $701 on Monday, with a market cap around $1.8 trillion.

Implied volatility captures how much is riding on this print. Estimates of the expected move are around 6%, and recent history supports the caution. After the Q2 report, shares slid roughly 8% to 10% in extended trading as spending and thin free cash flow overshadowed strong revenue. This earnings report is being treated as an early read on whether Big Tech’s AI investment is generating returns.
What's interesting about this announcement is that there's still plenty of implied volatility priced into the next few months remaining in 2026. Normally we see a big chunk of implied volatility priced within the earnings week relative to December for example, but META still has a big expected range for that year-end Monthly cycle:

Meta Muse: From Cash Burner to AI Monetizer?

Muse has become the main bullish storyline. It debuted on September 8, and Meta followed up on October 12 with Muse Wonder and Muse Wonder Full. Revenue impact is still unproven. Morgan Stanley highlighted a wide gap between downloads and ongoing usage, with retention around 20%, while Guggenheim emphasized the fast rise in daily users. Since the quarter captured only about three weeks of Muse, management’s outlook matters more than the reported figures. One encouraging data point is that Family of Apps other revenue reached $1 billion in Q2, up 73%, led by WhatsApp paid messaging and subscriptions.

Meta AI Capex: The Number That Moves the Stock

Spending remains the central issue. Meta started the year guiding 2026 capex to $115 billion to $135 billion, lifted it to $125 billion to $145 billion in April, and tightened it to $130 billion to $145 billion in July, without offering a 2027 number. October is when Meta has traditionally laid out the following year’s plan, and Bank of America projects $205 billion for 2027. The stock dropped more than 10% after last October’s report when Meta pointed to much higher spending, so a large 2027 figure is the key risk.

Bullish Case for Meta Earnings

The bull case rests on an advertising business that keeps accelerating. Bank of America forecasts Q3 ad revenue of $62.2 billion, up 24%, and says its checks show AI-based targeting is boosting advertiser returns. Excluding the legal charge, BofA expects underlying earnings to come in above consensus. The average price target is around $830, and Truist lifted its target to $1,000 on October 13. Bulls argue the market is already shifting its view of Meta from AI spender to AI monetizer, and solid guidance with early Muse traction would strengthen that view.

Bearish Case for Meta Earnings

Bears focus on margins and cash. Operating margin shrank to 31% in Q2 from 43% a year earlier, and consensus EPS has been cut by about 16% over the past 90 days. The state settlement totals roughly $18 billion over ten years, with about $5.3 billion contingent on whether TikTok and YouTube take comparable steps. One Hold-rated analyst contends that the Muse rally has already baked in the good news and points out that Meta skipped buybacks in Q2. With free cash flow expected to stay negative through 2027, a bigger-than-expected spending plan could hit the stock hard after a strong run.

Mike Butler, tastylive director of market intelligence, has been trading the markets for a decade. He appears on the tastylive morning show Monday - Friday. @tradermikeyb

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