Meta's Earnings Preview: AI Spending and Layoffs
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Should l Buy META?
Source: Newsfilter
- Increased AI Investment: Over the past three months, Meta has invested $14.3 billion in Scale AI, aiming to enhance its competitiveness in the AI sector through the newly established Meta Superintelligence Labs, despite not yet identifying new revenue streams.
- Layoff Plans: Meta plans to cut about 10% of its workforce, equating to 8,000 employees, while halting hiring for 6,000 open positions, a move aimed at addressing high energy costs and market pressures.
- Earnings Expectations: Analysts expect Meta's first-quarter earnings per share to be $6.79, with revenue projected at $55.45 billion, marking a 31% increase from the previous year, which would represent the strongest growth quarter since 2021.
- Capital Expenditures: Meta anticipates capital expenditures of $27.63 billion for the first quarter, with annual capex expected to range between $115 billion and $135 billion, reflecting the company's significant investment in data center construction.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 611.910
Low
655.15
Averages
824.71
High
1117
Current: 611.910
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Cloud Strategy: Market participants are closely monitoring how Meta is scaling its infrastructure to support AI workloads and digital services, with cloud-related commentary being a key focus in the earnings report that could sway investor sentiment.
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- Forecast Revisions: This earnings forecast significantly exceeds last Friday's 16.1% growth estimate and the 14.4% increase projected a month ago, reflecting analysts' optimism regarding the performance of megacap tech companies.
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- Reality Labs Losses: The Reality Labs division reported a $4 billion loss in Q1 with only $402 million in revenue, highlighting the low return on investment in AI and intensifying market skepticism about Meta's capital allocation capabilities.
- Advertising Business Growth: Despite challenges, Meta's advertising revenue surged by 33% in Q1, significantly outpacing rival Alphabet's 15.5% growth, demonstrating success in enhancing ad targeting and user engagement.
- AI Technology Application: The launch of the Advantage+ platform, which automates the advertising process using generative AI, has attracted over 8 million advertisers, driving a 19% increase in ad impressions and a 12% rise in ad prices, indicating strong progress in advertising technology innovation.
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