Deep|META: What Muse Could Mean for Meta

Insights from 654 Muse Use Cases and Our Advertising Agency Interview

Our view on Meta has shifted several times since we initiated coverage. We were bullish throughout 2024 and for most of 2025.

1. Our initial optimism centered on Meta’s Conversions API (CAPI) and the Advantage+ suite built around it. Together, they materially improved conversion performance and campaign automation.
2. The second catalyst was Meta’s generative recommendation system. We saw the value of scaling laws in recommendations and discussed both the mechanics and the ROI framework early on in our earnings previews. We later published a dedicated report on Meta’s progress. (Link).
3. The developments that followed were more incremental. For example:
   1. We remained firmly bullish in 1Q25, arguing that FX tailwinds and a much smaller-than-feared dutiable value for containerized imports could put Meta’s 2Q25 guidance well ahead of consensus.
   2. We also saw incremental product improvements. In 2Q25 and 3Q25, overlay ads contributed meaningfully by rapidly expanding Reels ad inventory.
   3. WhatsApp Updates and Business AI, however, failed to deliver the progress we had expected.
4. We turned more cautious in 3Q25 with our widely circulated report, Preview | META 3Q25: What Happens When META Doubles Down on AI Compute. From that point, we repeatedly highlighted the pressure that CapEx would put on margins and looked for a clearer framework to assess the returns on Meta’s investment.