Meta earnings recap: Stock pops on revenue, earnings beats, while Mark Zuckerberg talks AI, increased spending

Evercore analyst Mark Mahaney asked whether Meta's consistent $4 billion-per-quarter Reality Labs losses would ever come down, and if so, why and when.

Zuckerberg pointed to the rising momentum behind Meta's Ray-Ban smart glasses, saying they've "really taken off" and just "tripled in sales" in the last year.

"There are more investments that I think make sense to make around making sure that we can distribute this and grow it very quickly," he added.

"If you look at some of the leading consumer electronics products of other categories, by the time they get to their third generation, they're often selling 10 million units and scaling from there," Zuckerberg said.

"I'm not sure if we're going to do exactly that," he said, "but I think that's like the ballpark of the opportunity."

Zuckerberg also kicked off the call talking about the company's AI work, calling this "the major theme" at Meta right now.

He listed 5 ways AI usage is playing out at Meta: "Improved advertising, more engaging experiences, business messaging, meta AI, and AI devices."

While he noted these are "long-term investments that are downstream from us," he added that he thinks further down the road the company "will be wildly happy with the investments that we are making."

Both of these sentiments should sound familiar, as he's given similar remarks when pressed on the company's AI initiatives and spending in previous earnings calls.

In his opening remarks, CEO Mark Zuckerberg said Meta is "well-positioned to navigate the macroeconomic uncertainty" — but didn't explicitly name President Trump or cite his tariffs.

CFO Susan Li prefaced the company's guidance estimates by acknowledging the "dynamic macro environment" and noting the range "reflects the potential for a wider set of outcomes."

"We continue to feel good about the fundamental drivers of revenue growth, and believe the past work we've done to streamline our operations and cost profile puts us in a strong position to navigate a variety of outcomes," she said.

However, some listeners (including at BI!) noted glitches as Zuckerberg started to speak.

Investing.com senior analyst Thomas Monteiro says the company's AI integration plan "not only keeps growing at an impressive rate but also does so without burning through piles of cash, unlike most of the competition."

"Meta is quietly gaining ground as one of the greatest winners of the AI revolution — with still lots of tailwinds and room for expansion," he said.

While tariff uncertainty means eyes are on Meta's APAC ad revenue from retailers like Temu and Shein advertising to US consumers, the company is well-positioned to "free up margins from other parts of the operation without damaging its longer-term growth plans" if those figures skew lower, Monteiro adds.

As EMARKETER senior analyst Minda Smiley points out, Meta's strong earnings and healthy ad business show its massive content moderation overhaul in January, which included ending its fact-checking program and switching to a community notes-based model, didn't scare off advertisers.

The next test will be staying strong in the uncertain macroeconomic environment stemming from tariffs, though Meta's sheer size and reach should help safeguard them.

"Advertisers will allocate more ad dollars to proven, sophisticated networks like Facebook and Instagram — all while pulling back spend on smaller social platforms — while they navigate uncertainty," Smiley notes.

When big tech companies like Meta do mass layoffs — as the company has done over the last couple of years — it gets plenty of attention.

So you might be surprised to learn that in addition to firing thousands of people, Meta has also been hiring.

You can see that story buried in the company's earnings reports. After the first quarter of 2023, Meta had 77,114 fulltime employees. Then the company pushed out huge swaths of its employees, and by the end of that year it was down to 67,317.

Meta continues to cut and trim throughout the company — it just rolled out cuts to its Reality Labs division, as we note below.

But at the same time, it has also been hiring! Meta now says it has 76,834 employees. That's an 11% increase over the previous year, and it means Mark Zuckerberg's workforce has almost exactly as many people as it did two years ago.

Meta's Reality Labs division, which builds the Quest VR headsets, Ray-Ban smart glasses, and the Horizon Worlds platform, posted a $4.2 billion loss. That's wider than the $3.85 billion loss a year ago, but narrowed from $4.65 billion last quarter.

The unit remains a massive money sink, with over $50 billion in cumulative losses since 2020. Just last week, Meta laid off staff from its VR gaming teams and the Supernatural VR fitness app as part of a broader shakeup. Still, the company is keeping its foot on the gas — nearly 500 Reality Labs jobs remain open.

One bright spot? Meta's Ray-Ban smart glasses, which Zuckerberg sported at LlamaCon, the company's first event for AI developers yesterday, have become a surprise hit. Meta is reportedly expected to launch a new version with a built-in display later this year.

The company is being closely watched this earnings season, along with its Big Tech peers, for comments about its AI spending. It raised its estimate for full-year capital expenditures from a prior range of $60-$65 billion to $64-$72 billion now. That's up significantly from its full-year 2024 capex of $39.23 billion.

The increase "reflects additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware."

Meta said in its earnings report, however, that the majority of its capex this year will go toward its "core business."

First quarter

• Revenue: $42.31 billion, +16% y/y, estimate $41.38 billion

  • Advertising revenue: $41.39 billion, +16% y/y, estimate $40.55 billion
  • Family of Apps revenue: $41.90 billion, +16% y/y, estimate $40.89 billion
  • Reality Labs revenue: $412 million, -6.4% y/y, estimate $496 million
  • Other revenue: $510 million, +34% y/y, estimate $498.6 million

• Operating income: $17.56 billion, +27% y/y, estimate $15.52 billion

  • Family of Apps operating income: $21.77 billion, +23% y/y, estimate $20.04 billion
  • Reality Labs operating loss: $4.21 billion, +9.5% y/y, estimate loss $4.54 billion
• Operating margin: 41% vs. 38% y/y, estimate 37.5%
• EPS: $6.43 vs. $4.71 y/y, estimate $5.25

• Ad impressions: +5% vs. +20% y/y, estimate +6.87%

  • Average price per ad: +10% vs. +6% y/y, estimate +6.75%
• Average Family service users per day: 3.43 billion, +5.9% y/y, estimate 3.33 billion

Second quarter forecast

• Revenue: $42.5 billion to $45.5 billion, estimate $44.06 billion

Full-year 2025

• Total expenses: $113 billion to $118 billion, saw $114 billion to $119 billion, estimate $113.55 billion

• Capital expenditure: $64 billion to $72 billion, saw $60 billion to $65 billion, estimate $59.27 billion

  Source: Bloomberg data

Meta stock dipped 1% ahead of its earnings release on Wednesday after the closing bell. The S&P 500 closed 0.2% higher, while the Dow rose 0.4%.

Stocks were broadly lower on Wednesday after the release of first-quarter GDP, which dropped at an annualized rate of 0.3%, but reversed the losses into the close.

It seems like the Meta CEO has been everywhere ahead of his company's earnings report. From his marriage to AI trends, Zuck is getting deep this week during livestreams and podcast appearances. He opened up about the 7-foot statue he dedicated to his wife and got real about higher education.

The question on everyone's lips this earnings season is how companies plan to tackle tariffs. Zuckerberg seems to be taking a wait-and-see approach when asked about it, but investors will want some answers.

A day before its earnings, Meta held its first-ever AI developer event, LlamaCon, unveiling a new Llama API. The company also announced a standalone Meta AI app, its most direct challenge yet to OpenAI's ChatGPT. CEO Mark Zuckerberg was joined onstage by Microsoft's Satya Nadella and Databricks' Ali Ghodsi, underscoring Meta's push to become central to the AI developer ecosystem.

The event wasn't just about product announcements — it was a calculated play to reassure investors. "I expect Meta's earnings release and subsequent call to be packed with AI news," Forrester VP Mike Proulx told Business Insider, "not only because the company is making real and tangible progress, but also to counterbalance the intense pressure Meta is facing on multiple fronts," he said, pointing to the ongoing FTC antitrust trial against the company.

Expect Wall Street to listen closely during today's earnings call for signs that Meta's massive AI investments — including up to $65 billion in 2025 capex — are starting to deliver returns.

Meta's X competitor, Threads, had 320 million monthly active users at the time of the company's last earnings call, adding a million new people daily. It's one of the few recent social apps to scale this quickly, and Meta is finally starting to test monetization. Last week, the company began rolling out ads on Threads globally.

Still, Meta executives have said they don't expect the app to contribute meaningful revenue in 2025. For now, it's about playing the long game.

Zuckerberg has said Threads could one day reach a billion users and become "the leading discussion platform." The question for Wall Street is whether Meta can sustain the momentum.

Analysts will be closely watching Meta's investments in generative AI and its Reality Labs division, which has hemorrhaged money in recent quarters. Zuckerberg has said he's happy to keep funneling tens of billions in additional capex on generative AI even as analysts and investors press Big Tech for answers on when they'll see the massive spending pay off.

Meta recently held its inaugural LlamaCon, an AI developer conference. The conference featured remarks from Meta executives, including Zuckerberg, Microsoft CEO Satya Nadella, and Databricks CEO Ali Ghodsi. On Tuesday, the company also announced a standalone Meta AI app to compete with ChatGPT.

Wells Fargo said it expects Meta to be the "steadiest ship in a brewing macro storm," arguing that its dominance relative to other advertising platforms should shield it from some of the macroeconomic pain.

"Checks indicate ad spend growth on Meta moderated throughout the qtr, but likely more resilient vs. other ad platforms against softer macro backdrop given minimal brand exposure," Wells Fargo said.

The bank said Meta's Reels platform, which directly competes against TikTok, should have benefited from the uncertainty surrounding a potential TikTok ban earlier this year.

"Checks suggest ad spend on TikTok shifted to Meta during the heightened uncertainty in Jan, with some budgets permanently moving to Reels," the bank said.

Wells Fargo rates Meta Platforms at "Overweight" with a $752 price target.

A major topic during Tesla's earnings call last week was blowback over Elon Musk's political involvement with the Trump administration. While Zuckerberg's ties to the White House aren't as deep as Musk's, he has been increasingly involved with Trump 2.0 — and investors could make it known whether they approve.

Zuckerberg has had a contentious relationship with the president over the years; Trump once threatened the Meta CEO with life in prison. However, since the election, Zuck has seemed to try to smooth things over. Meta donated $1 million to Trump's inauguration and Zuckerberg was among the tech billionaires who got a front row seat to the swearing in This year, Meta partnered with the White House to bring the Easter Egg Roll.

Despite macroeconomic concerns, JPMorgan said that Meta's strong execution and AI opportunities should help the company's results.

"We believe META remains well-owned driven by strong execution & growing AI monetization," JPMorgan analysts wrote. "We're bullish on AI-driven Ad improvements, video unification, WhatsApp Ads, Llama, & Meta AI."

The bank said it believes investors expect Meta Platforms' revenue to grow by about 13% year over year. Meeting or beating those expectations would likely boost the stock. It said that while macro factors are a concern, "tens of millions of advertisers should prove relative insulation."

With regards to capex, JPMorgan expects the company to maintain its aggressive investment philosophy to capture the AI opportunity.

"Our $108B 2025 GAAP expenses is below Meta's $114B-$119B guide as we expect META to rationalize expenses against lower growth," JPMorgan said.

JPMorgan rates Meta Platforms at "Overweight" with a $610 price target.

Investors will be watching closely to see if Meta's Reality Labs — its hardware and virtual reality division — is cutting back on its burn rate after racking up more than $50 billion in losses since 2020.

The division, responsible for products like Quest headsets and smart glasses, was reorganized in January with key leaders now reporting directly to Meta's top brass.

Meta CTO Andrew Bosworth has called 2025 "the most critical" year for Reality Labs, writing in an internal memo obtained by BI earlier this year that it could determine whether the effort is remembered as a visionary feat or a "legendary misadventure." He also stressed that Horizon Worlds on mobile must succeed for Meta's metaverse ambitions to stay afloat.

Bosworth said Reality Labs grew sales 40% in 2024 and cited "massive" growth in wearables. But investors will want to see if those revenue gains are enough to begin narrowing the division's steep losses, which totaled $4.4 billion in Q3 of 2024 alone.

Bank of America is leaning bullish on Meta heading into its coming earnings release.

The bank said takeaways from Alphabet's comments on YouTube and its advertising checks should fuel a "modest beat" for Meta.

Meta's workforce reductions in February and recent layoff announcements related to its Reality Labs division suggest that management is laser-focused on controlling operating expenses.

"For expense guide, we would expect a trajectory toward the low end of the current $114-$119bn 2025 range," Bank of America said.

The bank is also bullish on Meta's growing AI capabilities and its potential to unlock more advertising spending.

"We think Meta's Al driven ad improvements still have several quarters to play out and for 2025 we see strong drivers of growth, including: 1) Expanding AI/ML ad capabilities, 2) Growing SFV usage aided by AI suggestions, 3) Growing messaging revenues, & 4) Monetization of untapped surfaces (Threads, Meta Al, Marketplace)," the bank said. SFV refers to "short form video."

Bank of America rates Meta Platforms at "Buy" with a $640 price target.

An elephant in the room is the Federal Trade Commission's antitrust trial against Meta. The company isn't expected to discuss the ongoing case during its earnings call, and the litigation isn't expected to have a significant impact on the results.

The trial kicked off earlier this month, and Zuckerberg testified over three days. The FTC alleges that Meta, then Facebook, violated US antitrust laws when it bought Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014.

Asked about Meta's acquisition of Instagram, Zuckerberg testified that he considered having Facebook build its own photo-sharing service, but ultimately, "I thought that Instagram was better at that, so I thought it was better to buy them."

Meta's attorneys have argued that the company still faces competition from social media platforms including TikTok, YouTube, and X.

Analysts at Goldman Sachs said Meta's Reels platform has the potential to drive significant growth for the company.

"We still see a sizable opportunity for Reels to remain a key revenue growth tailwind for META in the coming years as the CPM gap closes further and as Reels continues to increase as a % of total ad impressions," Goldman Sachs said.

On the spending front, the bank expects Meta to "somewhat pull back" on its planned investments due to macroeconomic headwinds.

Goldman expects 2025 total GAAP expenses of about $110.5 billion, slightly below the company's guidance range of $114 billion to $119 billion.

"For META, we see the key debates being how the company indicates a framework of balance between long-term investments and annualized operating costs if the macroeconomic environment impacts the business in the coming quarters," Goldman Sachs said.

Goldman Sachs rates Meta Platforms at "Buy" with a $685 price target.

First quarter

• Revenue estimate: $41.38 billion

  • Advertising rev. estimate: $40.57 billion
  • Family of Apps revenue estimate: $40.89 billion
  • Reality Labs revenue estimate: $496 million
  • Other revenue estimate: $498.6 million

• Operating income estimate: $15.52 billion

  • Family of Apps operating income estimate: $20.01 billion
  • Reality Labs operating loss estimate: $4.55 billion
• Operating margin estimate: 37.4%
• EPS estimate: $5.25
• Ad impressions estimate: +7.24%
• Average price per ad estimate: +6.36%
• Average Family service users per day estimate: 3.33 billion

Second quarter

• Revenue estimate: $44.06 billion
• Capital expenditure estimate: $14.75 billion

Full year 2025

• Total expenses estimate: $113.54 billion

• Capital expenditure estimate: $59.27 billion

  Source: Bloomberg data