Meta's advertising revenue grew 27% in Q2, narrowing the gap with Google Search to $3.9 billion. Analyst firm Bernstein says AI improvements to Meta's ad targeting and delivery could let the company overtake Google Search revenue by the end of 2026. Heavy AI infrastructure spending, however, has sharply cut Meta's free cash flow.
Meta's advertising business could overtake Google's core Search revenue before the end of 2026, according to analyst firm Bernstein, as AI tools reshape how the company sells and delivers ads.
Ad revenue closes in on Google
Meta's revenue climbed 28% year over year to $60.8 billion in the second quarter, with advertising revenue reaching roughly $59.4 billion, up 27%. Ad impressions rose 14%, while the average price per ad climbed 12%. Google Search and other advertising revenue reached $63.3 billion in the same quarter, up 17% year over year — leaving a gap of about $3.9 billion between the two companies.
Bernstein says Meta captured nearly half of every incremental digital advertising dollar in the quarter. According to the firm, AI is improving recommendations, engagement, targeting, ad delivery, and the path from product discovery to purchase.
Advantage+ powers the AI payoff
Meta's Advantage+ automated ad platform provides further evidence of that shift. During its second-quarter earnings call, Meta said Advantage+ was generating approximately $75 billion in annualized revenue, with advertisers using the system earning an average return of $4.52 for every dollar spent — about 22% more than manually configured campaigns. CEO Mark Zuckerberg has said Meta wants ad creation to become fully automated by the end of 2026.
AI spending squeezes free cash flow
But the buildout carries a cost. Meta spent $31.1 billion on capital expenditures in the second quarter alone, and free cash flow fell to just $784 million as infrastructure costs surged. That leaves Meta exposed if AI-driven ad returns slow down.
Google still leads, but growth trails
Alphabet's total Google advertising revenue reached $81.6 billion in the second quarter, up 14%, while Search alone grew 17%. Google is also applying AI to Search, through AI Overviews and AI Mode, to help sustain that pace. Bernstein believes Meta may already be roughly comparable to Google Search on a like-for-like basis, excluding certain Google businesses, though surpassing Search revenue by year-end isn't guaranteed.
Source: 24/7 Wall St.
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