Meta Just Crushed Earnings. Is It a Better Buy Than Alphabet?

Key Points

• Meta continues to deliver strong growth on the top and bottom lines.

• Its advertising business is benefiting from its AI investments.

• The social media giant has some advantages over rival Alphabet.

• 10 stocks we like better than Meta Platforms ›

Meta Platforms' (NASDAQ: META) hot streak continued on Wednesday after the social media giant delivered another blowout earnings report for the second quarter. The stock jumped double digits after hours, and Meta was on track to set a new all-time high on Thursday.

Revenue jumped 22% to $47.5 billion, which easily beat estimates at $44.8 billion. Revenue growth was driven by a balanced mix of growth in users, up 6%, ad impressions, up 11%, and price per ad, which rose 9%.

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Those results show its ad business is firing on all cylinders, and CEO Mark Zuckerberg credited its artificial intelligence (AI) investments for the improvements, noting that its AI-powered recommendation model helped drive 5% more ad conversions on Instagram and 3% more on Facebook. The improved ad performance helped lead to the growth in price per ad, showing that Meta's AI investments in advertising are paying off.

Meta's margins continued to expand, with its operating margin rising from 38% to 43%, and earnings per share rose from $5.16 to $7.14, well ahead of the consensus at $5.90. It also sees strong growth continuing into the third quarter, calling for revenue of $47.5 billion to $50.5 billion in Q3 revenue, which compares to the consensus at $46.3 billion.

Image source: Getty Images.

Why Meta's growth is soaring

Over the last few years, Meta has outperformed peers like Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Microsoft, and Amazon by a wide margin. And the second-quarter results show that the market may still be underestimating the company.

In the AI era, Meta has excelled at growing its core advertising business while also making investments in AI to seed emerging businesses, like its smart glasses, and to make acquisitions, including its deal to buy half of data-labeling start-up Scale AI for $14.3 billion.

That acquisition brought Scale founder Alexandr Wang into the Meta fold, where he's leading Meta's new Superintelligence Labs. The company sees superintelligence improving multiple aspects of the business, including advertising, experiences, business messaging, Meta AI, and AI devices.

In addition to the improvements to its ad-recommendation engine, Meta is gaining traction with its generative AI ad creation features, another way it's adding value for advertisers. Meta has achieved this growth in the overall business even as Reality Labs, its division focused on projects like AI and the metaverse, continues to lose upwards of $15 billion a year. However, the losses now seem to be stabilizing.

Better buy: Meta versus Alphabet

Meta's closest competitor in digital advertising is Alphabet, which, as the parent of Google Search, is the biggest digital advertising platform in the world. Both companies have strong competitive advantages, but Meta has outgrown its larger rival over the last several quarters due in part to the advances and investments in AI.

Alphabet, on the other hand, has also incorporated AI into Google Search through its AI assistant and AI mode. However, those features don't directly benefit the Google ad business. Instead, they seem to be more of a function of the company's need to defend its market share against AI-based competition such as ChatGPT and Perplexity. The innovations make sense, but they don't have the same benefit to the bottom line that Meta's do.

Additionally, the two companies seem to have different cultural approaches to AI. Alphabet has long invested in AI but was reluctant to deploy new products for fear it would disrupt its monopoly in search. Meta, on the other hand, has been nakedly aggressive in AI recently, poaching researchers from Apple and making multiple acquisitions, including Scale AI.

Overall, Meta is growing faster, and its AI strategy seems to fit better with its core business. The company seems well-positioned to continue delivering strong growth, especially as its ad machine stands to benefit from its AI investments.

Both Alphabet and Meta can be winners on the stock market, given their competitive advantages, but Meta looks like the better buy of the two today.

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Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.