Meta Q2 ad revenue jumps 27 per cent as AI drives advertiser demand

MUMBAI: Meta’s AI bet is no longer just training algorithms, it’s training the cash register too. The social media giant delivered another strong quarter as artificial intelligence fuelled advertiser demand, lifted engagement across its platforms and helped push advertising revenue to fresh highs.

For the second quarter of 2026, advertising revenue climbed 27 per cent year on year to $59.4 billion, driven by wider adoption of Meta’s AI-powered advertising tools across Facebook, Instagram, WhatsApp and Threads.

The company’s Family of Apps business generated $60.4 billion in revenue, up 28 per cent from a year earlier, accounting for the bulk of Meta’s overall quarterly revenue of $60.8 billion, which also rose 28 per cent year on year.

Meta said the improvement was supported by both stronger user engagement and better monetisation. During the quarter, ad impressions increased 14 per cent, while the average price per advertisement rose 12 per cent, reflecting advertisers’ willingness to spend more as campaign performance improved.

Chief Executive Officer Mark Zuckerberg said the company’s multi-billion-dollar investment in artificial intelligence is now translating into tangible business gains.

According to Meta, more than 9 million small businesses now use at least one of its AI-powered creative tools to build advertising campaigns, underlining the rapid adoption of generative AI across the advertising ecosystem.

The company also introduced Meta Generative Recommender, a new advertising system that uses large language models (LLMs) to analyse advertising content alongside user preferences rather than evaluating ads individually. The approach is designed to improve campaign relevance and targeting.

Early trials have already produced measurable gains. On Instagram, pilot programmes using LLMs to better understand user behaviour delivered a 1 per cent increase in app event conversions. On Facebook, upgrades to Meta’s ad-ranking models resulted in an 8.3 per cent increase in ad clicks and a 15.7 per cent improvement in conversions during the quarter.

Meta also reported that usage of its AI-powered image generation tools, which enable advertisers to create multiple campaign creatives from existing content, more than doubled during the quarter. The company has also launched an end-to-end AI creative solution that transforms campaign insights into fresh advertising assets while preserving brand identity. It added that its upcoming Muse Image model is expected to further enhance large-scale creative generation.

Beyond advertising, Meta expanded its consumer AI offering with the launch of Meta One, a subscription service that provides users with additional AI-powered capabilities across its family of apps.

Despite the strong revenue growth, profitability came under pressure as the company continued investing aggressively in AI infrastructure. Operating income declined 8 per cent year on year to $18.8 billion, while capital expenditure reached $31.1 billion, including principal payments on finance leases. Free cash flow fell sharply to $784 million, reflecting the scale of Meta’s infrastructure investments.

Meta’s market capitalisation stood at approximately $1.48 trillion at the end of the quarter.

The results underline how artificial intelligence is reshaping Meta’s business model. While soaring infrastructure spending continues to weigh on short-term profitability, the company’s AI strategy is already delivering stronger advertising performance, deeper advertiser engagement and new revenue opportunities strengthening its position in an increasingly competitive digital advertising market.