Meta had a strong performance in Q2 2025, with shares rising more than 11% in pre-market trading. The company’s revenue grew by 22% compared to the previous year, reaching $47.5 billion. Earnings per share also rose by 38% to $7.14 from Q2 2024. The company reported a 5% increase in ad conversions on Instagram and a 3% increase on Facebook, thanks to its GenAI-powered ad ranking systems. This is the first clear sign that GenAI is positively affecting Meta’s ad revenue, which may lead analysts to adjust their revenue forecasts. CFO Susan Li mentioned plans to invest more in AI infrastructure in 2026, suggesting the company expects strong returns, especially in reducing delays and improving performance. If these expectations are met, Meta’s stock may benefit further. However, the EU poses regulatory risks. Meta’s Less Personalised Ads could come under scrutiny from the EU’s Digital Markets Act, which may impact revenue in that region. Any signs of regulatory pushback could negatively affect the stock. Even though Meta’s stock has recently surged, regulatory uncertainties in Europe loom over the company. While the earnings report is promising, keeping a close eye on EU regulations is important. Meta’s future may depend as much on regulations as on its innovations. Following the earnings report and the stock’s rise, sentiment is optimistic. The strong performance from AI-driven ad upgrades suggests continued upward momentum. Investors might consider strategies to profit from this trend in the upcoming weeks. Meta’s 22% revenue growth is well above the overall digital ad market, which only grew by 12% in Q2 2025. This indicates that GenAI is creating a competitive advantage, supporting a positive outlook for the company. The confirmed 5% ad conversion increase on Instagram backs a higher valuation. Buying call options that expire in September 2025 could be an excellent way to take advantage of this trend. For cautious investors, selling out-of-the-money puts might be a good strategy as it generates income based on the belief that the stock will stay above key support levels after the strong earnings report. Still, we need to be mindful of the regulatory risks from Europe. Recent reports suggest regulators are planning to examine Meta’s “Less Personalised Ads” model at a meeting in mid-August, which could lead to significant stock price fluctuations. Looking back, the stock dropped over 4% in early 2024 after discussing the Digital Markets Act. Since Europe represented nearly 23% of Meta’s ad revenue in 2024, any negative ruling from the EU could quickly reverse the positive earnings sentiment. This risk is not just theoretical; it has historical precedence and financial implications. To prepare for this possibility, we might consider buying protective put options with expirations in late August or early September. These would serve as insurance against sharp declines caused by adverse EU news. For those who predict a significant price move but aren’t sure of the direction, a long straddle could benefit from volatility triggered by either AI advancements or regulatory concerns.

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