Meta Beats Q1 Expectations as AI Push Drives Growth

Meta Platforms saw its shares rise as much as 5% today after reporting first-quarter earnings that exceeded Wall Street expectations, demonstrating continued growth in both revenue and profitability despite macroeconomic uncertainties.

"Meta's remarkably solid Q1 shouldn't come as a surprise, as the company's turnaround plan continues to bear fruit against the backdrop of highly focused growth and improving financial metrics on both sides of the balance sheet," said Thomas Monteiro, senior analyst at Investing.com.

The social media giant reported earnings per share of $6.43, significantly surpassing analysts' expectations of $5.28. Revenue for the quarter reached $42.31 billion, above the forecasted $41.40 billion, representing a 16% increase year over year. Net income jumped 35% to $16.64 billion compared to $12.37 billion in the same period last year.

"We've had a strong start to an important year, our community continues to grow and our business is performing very well," said Meta founder and CEO Mark Zuckerberg in a statement. "We're making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives."

For the second quarter, Meta projects revenue between $42.5 billion and $45.5 billion, aligning with Wall Street's expectations.

The company announced it has lowered its projected total expenses for 2025 to between $113 billion and $118 billion, down from the previously estimated $114 billion to $119 billion. However, Meta increased its capital expenditure outlook for the year to between $64 billion and $72 billion, up from $60 billion to $65 billion, citing "additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware."

AI and Platform Growth

Meta's AI assistant now reaches nearly 1 billion monthly users, up from 700 million reported in January, with WhatsApp serving as the primary access point. The company also released a standalone Meta AI app this week, though Zuckerberg indicated the company will focus on building the product for at least another year before beginning monetization efforts.

The company's microblogging platform Threads has grown to 350 million monthly users, up from 320 million in January. Meta recently opened advertising opportunities to all "eligible advertisers globally" on Threads, though the company does not expect this to meaningfully drive revenue growth in 2025.

"While the company did receive a boost from continually resilient ad spending in the first quarter of the year, the star of the show continues to be the company's massive AI integration plan, which not only keeps growing at an impressive rate but also does so without burning through piles of cash, unlike most of the competition," noted Monteiro. "Looking at the current growth rate for the division, along with the healthy margins, Meta is quietly gaining ground as one of the greatest winners of the AI revolution - with still lots of tailwinds and room for expansion."

Advertising Headwinds and Future Outlook

While Meta's overall performance was strong, the company noted some challenges in its advertising business, particularly from Asia-based e-commerce exporters. CFO Susan Li mentioned reduced ad spending from these advertisers in the U.S. market, likely in anticipation of the ending of the de minimis loophole this Friday.

"A portion of that spend has been redirected to other markets, but overall spend for those advertisers is below the levels prior to April," Li explained during the earnings call.

This follows similar warnings from competitors like Snap and Google about potential headwinds affecting their respective advertising businesses due to macroeconomic uncertainty.

Looking ahead, Monteiro emphasized the uncertainty in the guidance: "Looking ahead into Q2 and beyond, as clearly depicted by the wide range provided in the guidance, growth will hinge on the currently highly uncertain macro environment. This is especially relevant for ad revenue, which remains anyone's guess, particularly in the APAC region - a key one for Meta."

He added that despite these uncertainties, "Meta remains remarkably resilient and thus in a good position to free up margins from other parts of the operation without damaging its longer-term growth plans."

Regulatory Challenges Continue

Meta continues to face antitrust scrutiny, with the Federal Trade Commission pursuing a monopoly case that could potentially result in the spin-off of Instagram and WhatsApp. The company was back in federal court last week defending against allegations that it has maintained an illegal monopoly in the social networking market through acquiring emerging rivals.

Despite these challenges, Meta's strong financial performance demonstrates the company's resilience and continued ability to grow its core business while investing heavily in future technologies like AI.