Facebook and Instagram parent company META will report second-quarter results after the close of trading on Wednesday, with the performance of the company’s AI spending and advertising business expected to be in the spotlight.
AI spending is a key metric for Wall Street, as investors eagerly await a return on big tech companies’ investments in the technology. Last quarter, Meta CFO Susan Li raised her estimate for the company’s total full-year spending to between $96 billion and $99 billion, from between $94 billion and $99 billion.
Meta is expected to report second-quarter earnings of $4.74 a share on sales of $38.3 billion, according to analyst estimates compiled by Bloomberg.Meta earned $2.98 a share on sales of $31.9 billion in the same period last year.
Revenue from its family of apps, which includes revenue from Facebook, Instagram, WhatsApp and Messenger, is expected to grow to $37.7 billion from $31.7 billion in the second quarter of last year. Like Google, Meta could see a boost from advertising related to this year’s elections and the Olympics.
Meta CEO Mark Zuckerberg attends SIGGRAPH 2024 in Denver, Colorado. (AP/David Zarbowski) (AP)
“Meta enters its second-quarter results in a strong position,” Mike Proulx, vice president and research director at Forrester, said ahead of the company’s earnings release.
“We expect Reels to continue to grow as Meta’s short-form video solution takes market share from TikTok. Threads has proven it can go head-to-head with X, but the question remains whether it can monetize it effectively,” Proulx added.
Jefferies analyst Brent Till had a similarly positive outlook for Meta, writing in a note to investors that the company’s quarterly earnings report leaves him remaining bullish on the social media giant’s growth.
“While most of the experts we spoke to pointed to healthy advertising budgets with “strong” growth in meta ad spend, some are starting to feel the effects of tougher regulations. [comparisons]” Till said.
While Meta’s ad revenue is expected to grow, that doesn’t mean every aspect of the company’s earnings report will be positive, as Wall Street is still trying to determine how long it will take for tech companies to start seeing any bottom-line results from investing in AI.
Last week, CEO Mark Zuckerberg announced Meta’s latest open source large-scale language model (LLM), Llama 3.1. Additionally, the Facebook founder said the industry should focus on open source AI instead of closed source models like OpenAI’s ChatGPT.
“AI remains a primary focus for Meta, as the battle for LLM has only just begun,” Proulx said. “We expect there to be little mention of the ‘metaverse’ or Horizon Worlds in the earnings call.”
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As for Meta’s Reality Labs division, analysts expect the business to generate revenue of $276 million to $376 million in the same period in 2023. Still, Reality Labs continues to hemorrhage cash.
Meta reported that the division, which develops the hardware and software to power Zuckerberg’s metaverse dreams, lost about $3.8 billion in the first quarter. The division has also been plagued by high turnover and a lack of clear vision, adding to Reality Labs’ woes, Yahoo Finance’s Yasmin Coram reported.
Meta’s announcement comes after Texas Attorney General Ken Paxton announced Tuesday that the state had secured a $1.4 billion settlement between the state and Meta over allegations that the company used Texans’ biometric data without permission for its tag suggestion feature.
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Contact Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter. Daniel Howley.
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