Meta Platforms (NASDAQ:META) is set to report its second quarter results on Wednesday, with investors focusing on the social media giant’s advertising sales growth along with updates on increased costs for AI roadmap.
Wall Street expects the Menlo Park, California-based company to post EPS $4.78 on revenue of $38.31 billion, implying a rise of 19.7% during the quarter.
Earlier in April, investors were disappointed as Meta’s guidance came in on the light side and the company’s forecast for increased capital expenditures to support its AI infrastructure drew attention, leading to the stock falling 12% in early reaction to first-quarter earnings.
The Facebook parent’s shares fell nearly 6% since its first quarter results. Still, the stock grew over 30% since the start of the year, outperforming the 14% rise in the broader S&P500 Index.
Last week, following Alphabet’s results, Meta and Snap shares went down over 4%, as investors were worried about a softening ad market.
However, BofA analysts expect Meta’s Q2 revenue at the upper end of the guide & meet/beat Street estimates, with lower-than-expected ad revenue deceleration in Q2, driven by improved advertiser sentiment and the inclusion of GenAI tools for better performance.
“We remain positive on Meta & think Reels, Messaging, & AI driven ad improvements are still early, and could lead to positive product surprises & revenue upside,” said BofA analyst Justin Post, adding that the brokerage doesn’t anticipate a repeat of last quarter’s higher ’24 expense guidance, though higher legal & capex are risks.
BofA estimates Q2 capex of $9.2B and free cash flow of $11.5B, while it expects Q3 revenue to be $39.5B, with growth decelerating 5pts to 16% year-over-year.
During Meta’s earnings call, investors would also want to focus on the outlook for capital expenditure and hear comments highlighting the return on AI investment.
Seeking Alpha analysts and Wall Street are bullish and rated the stock a Buy.
A recent Seeking Alpha analysis pointed out that given the company’s robust open-source strategy, AI advancements, and potential for exceeding growth expectations, Meta’s shares remain a Strong Buy going into earnings.
Meanwhile, Seeking Alpha’s Quant rating are cautious and consider the stock a Hold, dragged down by its valuation factor.
Over the last three months, EPS estimates have seen 11 upward revisions and four downward revisions, while revenue estimates have seen 15 upward revisions versus five downward moves.
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