Meta Q2 2025 earnings: 21% ad revenue growth, AI infrastructure improvements

Meta released its Q2 2025 earnings results yesterday:

• Advertising revenue increased by 21.5% on a year-over-year basis, to $46.6BN;
• Impressions served across the company’s Family of Apps increased by 11% on a year-over-year basis, an increase from 5% in Q1 2025;
• The average price per ad grew by 9% on a year-over-year basis, a decrease from 10% in Q1 2025;
• Net Income of $18.3BN increased by 36.2% year-over-year.

Meta’s stock surged by as much as 10% following the earnings report, having beaten analyst expectations on revenue and earnings, with revenue guidance in Q3 above what investors had estimated.

Meta’s impression growth in the quarter was particularly noteworthy. The sharp growth in impression growth seen during Meta’s ATT recovery phase is most likely a function of the expansion of Reels: I describe Meta’s strategy to combine the automated optimization of Advantage+ with an increased monetizable surface area through Reels and the open graph in Meta’s Renaissance (January 2024) and Unpacking Meta’s pivot to an open graph and short-form video (July 2022). But while Reels is likely still growing in terms of impression exposure, Q2 2025 exhibits a much higher growth rate than recent quarters. While ads were rolled out on Threads for all users in April 2025 and introduced to WhatsApp in June, Susan Li downplayed the contribution of these units to impression growth in her opening remarks in the earnings call (emphasis mine):

As of May, advertisers globally can now run video and image ads to Threads users in most countries, including the United States. While ad supply remains low and Threads is not expected to be a meaningful contributor to overall impression growth in the near-term, we are optimistic about the longer-term opportunity with Threads as the community and engagement grow and monetization scales … On WhatsApp, we are rolling out ads in Status and Channels, along with Channel Subscriptions in the Updates tab to help businesses reach the more than 1.5 billion daily actives who visit that part of the app. We expect the introduction of ads in Status will be gradual over the course of this year and next, with low levels of expected ad supply initially. We also expect WhatsApp ads in Status to earn a lower average price than Facebook or Instagram ads for the foreseeable future, due in part to WhatsApp’s skew toward lower monetizing markets and more limited information that can be used for targeting. Given this, we do not expect ads in Status to be a meaningful contributor to total impressions or revenue growth for the next few years.

So what explains the impression growth? Filtering the metric by reporting region reveals that APAC impression growth led all other geographies, having recovered from a nadir of 3% in Q4 2024 (keep in mind that these metrics capture year-over-year changes). Impression growth in UCAN of 9% was higher than it had been since Q1 2024. It’s also worth pointing out that Meta’s Daily Active People metric reached 3.48 billion in Q2 2025, marking a 6.4% year-over-year growth, the highest level since Q2 2024. Mark Zuckerberg also noted in the call that time spent on Instagram and Facebook had increased by 6% and 5% in the quarter, respectively, as a result of engagement optimizations. Susan Li remarked that “video time” had increased by 20% on Instagram and by 20% on Facebook in the US in the quarter.

Impression pricing can likely be explained by improvements to the company’s optimization infrastructure, as Mark Zuckerberg articulated in the earnings call:

On advertising, the strong performance this quarter is largely thanks to AI unlocking greater efficiency and gains across our ads system. This quarter, we expanded our new AI-powered recommendation model for ads to new surfaces and improved its performance by using more signals and a longer context. It’s driven roughly 5% more ad conversions on Instagram and 3% on Facebook.

Susan Li made a similar point in the follow-up earnings call:

So on your first question about impression growth, the worldwide impression growth acceleration that we saw in Q2 was driven primarily by incremental engagement on video and Feed surfaces, which benefited from a bunch of the ranking optimizations that we made to our content recommendations on Facebook and Instagram, and then to a lesser extent some of the ad load optimizations. We aren’t sharing an impression growth outlook per se. We generally see opportunities to continue driving impression growth, and that is one of the outputs of the ongoing investments that we’ve continued to make in the ranking and recommendations work.

For more detail on what the component tools within these systems do, I recommend my recent podcast episode with Meta’s VP of Monetization Infrastructure, in which he unpacks the purpose and function of Lattice, Andromeda, and GEM. All three of these systems were discussed in Susan Li’s opening remarks in the earnings call; she noted that improvements to Andromeda in the quarter drove “4% higher conversions on Facebook mobile Feed and Reels,” and that improvements to GEM increased ad conversions by “approximately 5% on Instagram and 3% on Facebook Feed and Reels.”

Susan Li also pointed out that the onboarding change that Meta made for Advantage+, wherein Advantage+ is turned on for new campaigns by default, was completed in Q2, with 2MM advertisers now using the company’s video generation tools for creative production (up from 1MM in September 2024, less than a year ago).

Given the significant performance improvements that Meta achieved in the quarter with Lattice, Andromeda, and GEM, as well as the breakneck adoption of its generative AI tools for creative production, the lingering focus by analysts and journalists on the company’s CapEx and recruitment spending for its superintelligence effort strikes me as distracted.

There exists a pervasive narrative that frames Meta’s investments in AI as principally a future-focused, unproven, and risky bet. But Meta’s AI initiatives are bearing fruit now: they’re both a future prospect as well as a contemporaneous boon that is delivering impressive advertising impression and monetization growth fairly consistently. These investments aren’t speculative bets: they are demonstrable growth accelerants for the company’s core business, advertising. Obviously, the company must continue to scale this infrastructure, and it must present a credible long-term vision with this strategy. But what evidence exists that it hasn’t applied AI infrastructure to great effect thus far?