Meta's core ad business is still very strong, but the extraordinary impression growth and price-per-ad growth that investors needed to see to justify the AI capex both moderated this quarter.

Meta's historically strong ad business, where both impressions and price-per-ad grew together in 2023, saw that trend cool off this quarter, undermining the narrative that Meta's core business is expanding fast enough to justify its AI spending. ✦ AI generated

Ben Thompson · Stratechery · 2026-08-03 · original ↗

The most interesting lines on this chart are always impressions growth and price-per-ad growth, which historically move in opposite directions for what should be an obvious reason: more impressions growth means more supply, which given stable advertiser demand, results in decreased price growth; less impressions growth means less supply, which given stable advertiser demand, results in increased price growth. That means the most extraordinary results for the underlying business are when both impressions growth and price-per-ad growth are increasing, because demand growth is outpacing supply growth. This happened most notably in 2023 when Meta finally figured out ATT (improving advertiser demand) even as the company started to heavily monetize Reels (increasing ad supply). I was a bit concerned throughout 2025 that the company was juicing supply by increasing ad load; Meta characterized this as 'ad load optimization' and evidence that their spending was justified through increased monetization. And, last quarter, it all seemed to come together: impressions growth increased, and price-per-ad growth increased; if Meta could keep that trend up then perhaps investors would tolerate their capex spend simply because the core business was on a 2023-type of expansion. Unfortunately, while this quarter's results are still very good, they're not quite as extraordinary, and that's a problem when expenses increased 55% while revenue increased 28% — and remember, a lot of the company's capex hasn't started depreciating yet (and yes, that increase includes charges related to legal proceedings, but those might not be a one-off!). The company, more than ever, needs to convince investors about its AI spending on its own merits, and frankly, I came away from the call a bit alarmed.

Read full article ↗excerpt · fair-use quotation