Deepwater Asset Management's Managing Partner Gene Munster offered a detailed analysis of Meta Platforms Inc's (META  ) third-quarter performance, highlighting the company's strong core business and ambitious AI investments.

What Happened: "Following the Meta call, the key takeaway is the core business is doing great and they're aggressively investing in AI to become the next big thing," Munster wrote on X. "My guess is that big thing is related to monetizing search."

In his analysis, Munster emphasized several key points:

  • Revenue Growth: Meta achieved 19% year-over-year growth in the September quarter, slightly exceeding expectations of 18%. The company's guidance suggests further acceleration to 20% growth in December.
  • User Engagement: Daily active users reached 3.29 billion, growing at 5% year-over-year. While slightly below estimates of 3.31 billion, Munster noted this growth is impressive given Meta's already massive user base, with approximately half of the world's population using a Meta property daily.
  • Capital Expenditure: Meta's aggressive infrastructure investment could see an 87% increase in the December quarter, significantly higher than competitor Alphabet Inc (GOOGL  ) (GOOG  ) owned Google's projected 19% increase. Munster supported this strategy, calling it "absolutely the right thing for the company to do."
  • Competitive Position: Meta's growth outpaces its tech peers, with Munster comparing the company's projected 20% December growth to Microsoft Corp.'s (MSFT  ) 14% and Google's search business at 12%.
Following the $META call, the key takeaway is the core business is doing great and they're aggressively investing in AI to become the next big thing. My guess is that big thing is related to monetizing search.

Why It Matters: Despite positive fundamentals, Meta's stock declined 3% in after-hours trading, which Munster attributed to high pre-earnings expectations. He noted the stock had already risen 20% in the previous three months, compared to the NASDAQ's rise of just over 5%.

Looking ahead, Munster believes Meta's massive user base positions the company well for AI implementation, potentially leading to "growth rates that are higher than what most people think for the next couple years."

The analysis also touched on Meta's AI ambitions, with the company reporting a 7% improvement in advertising conversion rates through AI-powered targeting tools. According to Munster, Meta aims to have the most widely used generative AI chat service by year-end.

Price Action: Meta stock closed at $591.80, down 0.25% on Wednesday. In after-hours trading, the stock declined further, dropping 3.18%. Year to date, Meta has shown substantial growth, surging by 70.90%, according to data from Benzinga Pro.