By Christine Ji and Nora Redmond

Meta's core advertising business delivered a strong quarter, but investors are eyeing promising new businesses around the Muse personal assistant

More than a quarter of users on Meta's Muse agent use the assistant to shop, with an average transaction value exceeding $200, according to Meta.

Investors were optimistic about Meta CEO Mark Zuckerberg's artificial-intelligence vision - but a broader sector selloff hasn't helped the company's share price

Meta's stock (META) fell nearly 2% in premarket trading Thursday following its latest earnings report as shares in technology companies across the board saw red following a selloff in Asia.

The social-media giant grew revenues 26% from a year earlier to $64.6 billion, thanks to its artificial-intelligence-powered recommendation engines and rising advertising prices.

The rapid revenue growth gave investors proof that Meta's AI spending is materially improving its existing business, David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, told MarketWatch over email.

But Meta sees even more lucrative opportunities beyond its current business: On the earnings call, Zuckerberg said that the company's Muse agent could ultimately generate even more revenue per user than the company's family of apps like Instagram and Facebook. He painted a picture of a Muse business model comprised of subscriptions, ads, e-commerce tools and other features.

Analysts at Morgan Stanley, headed by Brian Nowak, said better ad performance and improvements including double-digit engagement growth and more Thread users gave them "increased confidence in Meta's core businesses to grow faster for longer."

Meta expects to spend between $135 billion and $145 billion on capital expenditures, or investments in physical assets, in 2026. The company spent $34.91 billion in the third quarter alone, which actually came in slightly under consensus estimates of $41.12 billion.

The intense AI spending led Meta's free cash flow for the quarter to turn negative for the first time since 2012. But after Meta's recent launch of its frontier-level Wonder models and the viral success of Muse, Wall Street initially seemed to believe that the cash burn was justified.

Revenue and capital expenditures were "better than expected," Pivotal analyst Jeffrey Wlodarczak wrote in a note following the earnings call. He raised his price target on the stock to $960 from $930 previously, highlighting strong Muse-usage metrics.

"Current utility is already showing promising signs of eventual monetization potential," a team at Goldman Sachs, led by Eric Sheridan, said in a note about Muse. Management announced that shopping with the AI agent is already being used by over one quarter of its weekly active users, with purchases pricing an average of over $200.

For the current quarter, Meta expects between $73 billion and $76 billion of revenue, which "leaves room for upside," Jefferies analyst Brent Thill wrote in a Wednesday note.

While Meta didn't share any information on capital expenditures for 2027, spending is likely to continue ticking upward. Meta announced the creation of a non-voting Class C stock that it plans to use for potential deals, capital raises, employee compensation and other purposes. The move also allows Zuckerberg to maintain his majority voting power. Thill anticipates that Meta's future funding plans will remain a "key focus."

-Christine Ji -Nora Redmond

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