Meta (META), the parent company of Facebook and Instagram, reports its second-quarter earnings after the bell Wednesday, and the company’s AI spending and advertising business performance are expected to take center stage.
AI spending is a key measure for Wall Street as investors eagerly await the return of Big Tech’s investments in the technology. During the previous quarter, Meta CFO Susan Li raised the company’s full-year total expense estimate from between $94 billion and $99 billion to between $96 billion and $99 billion.
For the second quarter, Meta is expected to report earnings per share of $4.74 on revenue of $38.3 billion, according to analyst estimates compiled by Bloomberg. Meta had earnings per share of $2.98 on revenue of $31.9 billion during the same period last year.
Revenue from the company’s family of apps, which includes revenue from Facebook, Instagram, WhatsApp and Messenger, is expected to reach $37.7 billion, up from $31.7 billion in the second quarter of last year. Like Google, Meta could gain momentum from publicity surrounding this year’s elections as well as the Olympics.
“Meta comes into its second-quarter earnings in a position of strength,” Forrester vice president and director of research Mike Proulx said ahead of the company’s earnings announcement.
“Expect to hear continued growth for Reels as Meta’s short-form video solution cuts into TikTok’s market share. And while Threads has proven it can take on X, whether or not it can effectively monetize remains a question,” Proulx added.
Jefferies analyst Brent Thill offered a similarly positive outlook for Meta, writing in an investor note that the company’s intra-quarter checks remained bullish on the social media giant’s growth.
“Most experts we spoke to noted healthy advertising budgets, with ‘strong’ growth in target spend, although some are beginning to see the impact of stricter measures. [comparisons],” Thill said.
While Meta’s advertising revenues appear to be performing strongly, that doesn’t mean every aspect of the company’s earnings report will be positive. Wall Street is still trying to determine how much longer tech companies will need to invest in AI before they see any kind of revenue return.
Last week, CEO Mark Zuckerberg announced Meta’s latest open source large language model (LLM), called Llama 3.1. What’s more, the Facebook founder said the industry should focus on open-source AI rather than closed-source models like OpenAI’s ChatGPT.
“AI remains Meta’s dominant focus as the battle of LLMs is just beginning,” said Proulx. “Expect mentions of the ‘metaverse’ or Horizon Worlds to be few to none during the conference call.”
Speaking of Meta’s Reality Labs segment, analysts predict the business will generate revenue of US$376 million, up from US$276 million in the same period in 2023. Even so, Reality Labs continues to hemorrhage cash.
In the first quarter, Meta reported that the segment, tasked with developing the hardware and software intended to power Zuckerberg’s metaverse dream, lost about $3.8 billion. The division has also been affected by turnover and a lack of clear vision, adding to Reality Labs’ problems, Yasmin Khorram of Yahoo Finance reported.
Meta’s announcement also comes after Texas Attorney General Ken Paxton announced Tuesday that he has secured a $1.4 billion settlement between the state and Meta over Texas’ alleged use of Texans’ biometric data. company without your permission to the Tag Suggestions feature.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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