Demand for ad inventory across Meta's networks remains very strong. Average ad pricing was impressive, increasing 10% year over year, driving 22% revenue growth.
The ad business remains extremely profitable. Free cash flow increased nearly 20% to $13.2 billion during the quarter despite an increase in capital investment to $8.2 billion from $6.1 billion a year ago.
We increased our fair value estimate to $450 per share from $400 based on the resilience of ad revenue growth and the continued operating leverage Meta has shown despite increasing R&D investment.
We still think revenue growth will slow sharply in the coming quarter, and any pullback from Asia-based retailers like Temu could cause a negative surprise.
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