Artificial intelligence continues to fuel a resurgence in digital advertising, providing a significant boost to tech giants and reshaping competition across the online ad market.
A CNBC report notes that Meta and Alphabet both reported second-quarter sales and earnings that exceeded Wall Street’s expectations, with AI-powered ad optimization emerging as a central growth driver. Meta CEO Mark Zuckerberg credited artificial intelligence with creating “greater efficiency and gains across our ad system,” helping to deliver a 22% year-over-year jump in revenue to $47.52 billion.
Meta’s Chief Financial Officer, Susan Li, added more color during a follow-up call with analysts on July 30, noting that the online ad market had improved since April, particularly among Asian-based e-commerce companies. Earlier this year, such firms had pulled back sharply on U.S. ad spending in response to President Donald Trump’s aggressive tariff policies and the closure of the de minimis trade loophole, which previously allowed low-value imports to bypass certain duties.
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Li said the rebound in spending was complemented by stronger activity from small, North American advertisers — a signal that confidence in consumer demand may be stabilizing.
“We generally expect another quarter of healthy advertising demand,” Li told investors, underscoring the broader recovery trend.
Gil Luria, head of technology research at D.A. Davidson, framed the sector’s resilience as part of a larger economic story.
“Digital advertising in general is doing well; it is simply an extension of the fact that the consumer is still strong,” Luria said. “There’s optimism that consumer spending will hold up and therefore all the downstream markets will hold up.”
Jasmine Enberg, vice president and principal analyst at eMarketer, emphasized that the strong core performance at Meta and other tech giants has enabled them to sustain heavy AI investment without alarming investors.
“You can spend a lot of money on AI when your core business is doing well, and especially when your core business has already been benefiting from those AI investments,” she said.
The scale of this spending remains staggering. Alphabet has increased its 2025 capital expenditure forecast by an additional $10 billion, bringing it to $85 billion. Meta has also raised the low end of its capex guidance for this year to between $66 billion and $72 billion, up from the previous range of $64 billion to $72 billion. Investors have largely shrugged off these massive commitments because sales at both companies continue to rise.
While the largest platforms consolidated their dominance, other players in the digital ad ecosystem saw mixed results. Reddit staged a remarkable turnaround, reporting $500 million in second-quarter revenue — up 78% from a year earlier — which sent its shares soaring as much as 20%. Luria described the company’s performance as a “phoenix” moment, especially given that its shares had plunged more than 15% in February after a Google search algorithm change weakened user growth.
In contrast, Snap and Pinterest delivered lackluster results. Snap’s revenue grew just 9% year-over-year, missing analyst expectations for global average revenue per user. CEO Evan Spiegel acknowledged that a problematic update to the company’s advertising platform hurt “topline growth.” In a sign of growing rivalry, Snap’s latest 10-Q filing formally listed Reddit as a competitor, highlighting the shifting competitive landscape in social media and digital advertising.
Pinterest fared worse in market reaction, with shares falling more than 10% after reporting second-quarter results that missed earnings per share estimates. CFO Julia Brau Donnelly reiterated that the company continues to see some tariff-related caution among advertisers and broader market uncertainty. Unlike Meta, Pinterest has not yet seen a rebound from Asian-based e-commerce retailers, which have remained hesitant to increase U.S. ad spending.
Enberg noted that the diverging fortunes of these companies illustrate the pressures facing smaller platforms in a volatile global economy.
“There’s very little room for mistakes or missteps,” she said, pointing out that in times of uncertainty, advertisers often consolidate budgets with the largest, most proven platforms.
For now, the momentum is firmly with the giants. Meta and Alphabet are demonstrating that when consumer spending is robust and AI is delivering tangible returns on ad efficiency, investor appetite for even larger AI investments remains strong. But analysts say for smaller competitors, the path forward will require not only technical innovation but also flawless execution in a market that punishes missteps swiftly.