Financial Trends -- 7/10
Strong, re-accelerating top-line growth running ahead of cash generation. Revenue inflected from a
+16.1% trough (1Q25) to +33.1% (1Q26) -- the fastest in over four years -- on an advertising engine
where impressions (+19% YoY) and pricing (+12% YoY) are re-accelerating together, the hallmark of a
dominant platform. Gross margin rock-steady at ~82%; share count declining via buybacks. The blemish
is free cash flow: the AI/infrastructure capex ramp (quarterly capex up ~3x to ~$20B) compressed FCF
margin from ~38% to 22% and pushed FY2025 FCF down -16.3%, with long-term debt doubling to ~$59B.
No penalty modifiers triggered.
Weight: 25%
Gross Margin
~82%
Rock-steady | Stable
FCF
Choppy
FY25 -16.3% on capex ramp | Watch
Share Count
Declining
Buyback-driven | No dilution
Quarterly Revenue Trajectory ($M)
Revenue re-accelerated for four consecutive quarters: +16.1% trough (Q1'25) to +33.1% (Q1'26).
Advertising (98% of revenue) drove it -- +32.9% YoY in Q1'26 -- with ad impressions (+19% YoY)
AND average price per ad (+12% YoY) inflecting up together, the signature of a dominant platform
taking price and volume simultaneously. Constant-currency growth was +29% in Q1'26.
Quarterly Metrics ($M)
| Metric | Q2'24 | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 |
|---|---|---|---|---|---|---|---|---|
| Advertising Rev | $38,329M | $39,885M | $46,783M | $41,392M | $46,563M | $50,082M | $58,137M | $55,024M |
| Operating Income | $14,847M | $17,350M | $23,365M | $17,555M | $20,441M | $20,535M | $24,745M | $22,872M |
| Op Margin (GAAP) | 38.0% | 42.7% | 48.3% | 41.5% | 43.0% | 40.1% | 41.3% | 40.6% |
| Free Cash Flow | $10,898M | $15,522M | $13,152M | $10,334M | $8,549M | $10,625M | $14,077M | $12,386M |
| FCF Margin | 27.9% | 38.2% | 27.2% | 24.4% | 18.0% | 20.7% | 23.5% | 22.0% |
| CapEx (incl. leases) | ($8,472M) | ($9,202M) | ($14,836M) | ($13,692M) | ($17,012M) | ($19,374M) | ($22,137M) | ($19,840M) |
Operating income still growing in dollars, but margins are flat-to-compressing and FCF is choppy.
GAAP operating margin sits at 40.6% (Q1'26), down from the 48.3% peak (Q4'24) as the AI capex/opex
ramp weighs. The key weakness: FCF margin compressed from a ~38% peak (Q3'24) to 22.0% (Q1'26) as
quarterly capex tripled from ~$6.7B to ~$20B -- three straight quarters of negative FCF growth
across Q1-Q3'25. Revenue up / operating income down penalty does NOT trigger (op income +30% YoY in Q1'26).
Annual Financial Summary (FY ends December)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $117,929M | $116,609M | $134,902M | $164,501M | $200,966M |
| Rev YoY | — | -1.1% | +15.7% | +21.9% | +22.2% |
| Operating Income ($M) | $46,753M | $28,944M | $46,751M | $69,380M | $83,276M |
| Operating Margin | 39.6% | 24.8% | 34.7% | 42.2% | 41.4% |
| Diluted EPS ($) | $13.77 | $8.59 | $14.87 | $23.86 | $23.49 |
| Free Cash Flow ($M) | $38,439M | $18,439M | $43,010M | $52,103M | $43,585M |
| FCF YoY | — | -52.0% | +133.3% | +21.1% | -16.3% |
Key trends
- Revenue compounding then re-accelerating: From $117.9B (FY21) to $201.0B (FY25), +22% in each of the last two years, now inflecting to +33.1% in Q1'26 on the AI-driven ad engine
- Operating income growing in dollars: $46.8B (FY21) to $83.3B (FY25), margins holding in the low-40s% despite the AI opex ramp
- Share count declining: Diluted shares fell from 2,641M (3Q23 peak) to 2,564M (Q1'26), buyback-driven with no dilution
- FCF is the blemish: FY2025 FCF fell −16.3% ($52.1B to $43.6B) despite +22% revenue, as capex outran cash generation
Segment Revenue Mix (Q1 2026)
Economic exposure is ~100% digital advertising, with a venture-stage option on AI glasses.
Family of Apps generated $26.9B of operating income in the quarter; Reality Labs lost $4.0B and
remains a steady ~$4B/quarter drag. RL is a strategic option (Ray-Ban Meta smart glasses,
~70% category share), not yet a second profit engine.
Share Count & Long-Term Debt
- Share count declining: 2,610M (Q2'24) to 2,564M (Q1'26), buyback-driven, no dilution
- Debt roughly doubled: Long-term debt jumped from ~$28.8B (Q3'25) to ~$58.7B (Q4'25) via a large bond issuance to fund the AI/data-center build; net debt/EBITDA still modest at ~0.56x
Blemishes -- Held Back From a Top Score
| Blemish | Detail | Penalty |
|---|---|---|
| FCF Not Durably Growing | FY25 FCF fell -16.3% ($52.1B to $43.6B) despite +22% revenue; three consecutive quarters of negative FCF growth (Q1-Q3'25); FCF margin compressed ~38% to 22% | Gate NO |
| Operating Margin Flat/Compressing | GAAP op margin 40.6% (Q1'26) vs 48.3% peak (Q4'24); not expanding 100+ bps -- caps the base score | None |
| Debt Step-Up | Long-term debt doubled to ~$59B in one quarter to fund AI build; single step, not 3+ consecutive quarters -- penalty does not trigger | None |
Score Rationale
Score of 7/10 reflects a strong, re-accelerating growth story running ahead of cash generation. Base around 7: accelerating revenue and a declining share count pull up; flat-to-compressing margins and choppy FCF hold it short of a 9-10.
Supports 7/10:
- Revenue re-accelerating to +33.1% YoY in Q1'26 -- the fastest in over four years -- on impressions +19% AND pricing +12% inflecting together
- Advertising (98% of revenue) grew +32.9% YoY, confirming a dominant, price-setting platform
- Gross margin rock-steady at ~82% across the last eight quarters
- Share count declining (2,641M peak to 2,564M), buyback-driven, no dilution
- Operating income still growing in dollars (+30% YoY in Q1'26)
Held back from a top score:
- FCF positive but NOT durably growing -- FY25 fell −16.3%; three straight quarters of negative FCF growth (gate NO)
- Operating margin flat-to-compressing (40.6% vs 48.3% peak), not expanding
- Long-term debt doubled to ~$59B to fund the AI/data-center build
Penalty modifiers checked -- none apply: negative FCF NO; share dilution NO; revenue up / operating income down NO; debt up faster than revenue 3+ consecutive quarters NO.
Data sourced from Daloopa (company_id: 73). Fiscal year ends December 31. All financials in USD. Market data: price $557.67 as of 2026-06-24 (FMP).