Can This Number Push Meta Platforms Stock Higher?
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One number stands out at Meta Platforms (META): the price advertisers pay for each ad, and that may be what Meta bulls are betting on. You probably think of Meta as a company pouring its profit into AI. Its third quarter of 2026 looked weak too, with operating income down 37% from a year earlier, though that fall came from a $9.9 billion legal charge. Yet advertisers paid more for each ad that quarter. So how much more are advertisers paying?
Advertisers Are Paying Meta More For Each Ad
The average price per ad rose 14% in the third quarter of 2026 from a year earlier. This increase outpaced the 10% rise in the number of ads Meta showed. That matters because ads constitute nearly all of Meta’s business. They brought in $63.1 billion of its $64.6 billion in revenue that quarter.
Management credited the higher price to ads that perform better and to a better economy than a year earlier. Some of that performance comes from Meta’s own AI. Management said a new system that uses large language models to pick the best ad for each person lifted conversions by nearly 2% in targeted parts of the Facebook feed.
That is the surprise at Meta: the AI that costs it so much is already making its ads worth more to the businesses that buy them, by management’s account.
Meta’s Costs Are Rising Faster Than Its Ad Sales
Meta’s total expenses rose 68% from a year earlier in the third quarter of 2026, compared with a 26% rise in ad revenue. Management said the growth came mainly from legal costs, infrastructure costs and AI computing bought from other companies.
The legal costs included a $9.9 billion charge for an agreement with several state attorneys general. On October 21, Meta was also ordered to pay $25 billion in penalties in a New Mexico case tied to the Cambridge Analytica scandal. That order came after the quarter ended on September 30.
Meta’s operating margin fell to 20.1% in the quarter, down from 40.1% a year earlier. Capital spending on servers, data centers and network infrastructure, including finance lease payments, reached $34.9 billion, and free cash flow turned negative. Meta is also raising outside money. On October 26, it priced $25.0 billion of new Class A shares at $625 each.
Meta stock trades at 21.8 times its earnings over the past twelve months, compared with 22.3 for the S&P 500. Its operating margin over those twelve months was 32.9%, against 19.0% for the index. Buyers are therefore paying an average multiple for a more profitable company. Those trailing earnings predate the New Mexico penalty ordered in October.
Management’s answer on costs is that, excluding the legal charge, third-quarter operating income would have risen 11% from a year earlier. It also warned that active legal and regulatory matters could significantly affect its business and financial results. Management has given no cost figures yet for Muse, Meta’s new AI agent. It said Muse is very compute intensive to run, and it expects the total cost of serving users to rise as more people use it. It also said it expects to improve Muse’s cost efficiency by more than 10x within a year.
How Exposed Are Meta’s Ad Prices To The Economy?
They are partly exposed, since management tied some of the rise in price per ad to a better economy than a year earlier, and a downturn could take that part back. The shares themselves have fallen hard in a bad market before: in the 2022 inflation shock they fell 71%, against 24% for the SPDR S&P 500 ETF.
The change in Meta’s average price per ad, measured against how fast its expenses grow, is the figure to watch next. Meta is expected to report its fourth quarter in January 2027. Management said that call is typically when it gives its outlook for 2027.
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