Meta’s shares rose 5% after reporting stronger-than-expected Q1 revenue of $42.31 billion and earnings per share of $6.43. The company’s net income increased 35% year-over-year to $16.64 billion. For Q2, Meta expects sales between $42.5 billion and $45.5 billion. CEO Mark Zuckerberg expressed confidence in navigating economic uncertainty, despite reduced ad spending from Asia. Meta also warned of regulatory challenges impacting its European business and reported a $4.2 billion operating loss in its Reality Labs division. Daily active users rose to 3.43 billion, and Threads now has 350 million users. The company plans to enhance AI investments.
Meta saw a surge of up to 5% on Wednesday following the announcement of higher-than-anticipated revenue for the first quarter, along with second-quarter guidance that aligned with Wall Street’s forecasts.
Here’s how the company’s performance compared with analyst expectations from LSEG:
- Earnings per share: $6.43 vs. $5.28 anticipated
- Revenue: $42.31 billion vs. $41.40 billion anticipated
In the first quarter, Meta’s sales experienced a year-over-year increase of 16%, and net income surged 35% to $16.64 billion, up from $12.37 billion the previous year.
For the second quarter, sales are projected to range from $42.5 billion to $45.5 billion, according to Meta finance chief Susan Li, aligning with analyst expectations of $44.03 billion. However, she noted that the company is beginning to notice decreased advertising spending from Asian e-commerce exporters.
“Our business is thriving, and I believe we’re well-positioned to manage the macroeconomic uncertainties,” Meta CEO Mark Zuckerberg stated during an earnings call on Wednesday.
Meta has reduced its total expense forecast for 2025 to between $113 billion and $118 billion, down from a previous estimate of $114 billion to $119 billion.
Conversely, capital expenditures for 2025 have been increased to a range of $64 billion to $72 billion, up from the earlier forecast of $60 billion to $65 billion.
“This revised outlook reflects further investments in data centers to enhance our artificial intelligence initiatives and an increase in the anticipated costs of infrastructure hardware,” the company noted in its earnings report.
The anticipated rise in infrastructure hardware costs is due to “suppliers sourcing from various countries,” Li explained.
“There is substantial uncertainty surrounding this issue, considering the ongoing trade discussions,” Li remarked, adding that Meta is implementing mitigations by optimizing its supply chain.
Furthermore, the company cautioned that a recent decision by the European Commission could lead to a significantly worse user experience for European users and “substantially impact” Meta’s revenue and operations in Europe by the third quarter. This situation stems from the EC’s ruling that Meta’s ad-free subscription service for European users violates one of its regulations.
“We are actively engaging with the European Commission regarding this matter, and we hope to provide more clarity by the next quarter’s earnings call,” Li stated.
Meta’s advertising revenue for the first quarter reached $41.39 billion, surpassing Wall Street estimates of $40.44 billion.
The Reality Labs division reported an operating loss of $4.2 billion in the first quarter, which was better than the $4.6 billion loss analysts were anticipating. Nevertheless, sales from Reality Labs totaled $412 million, representing a 6% decline year over year and falling short of the expected $492.7 million.
Daily active users increased to 3.43 billion in the first quarter, exceeding analyst projections of 3.39 billion and rising from 3.35 billion in the previous quarter.
Zuckerberg mentioned that the Threads microblogging service has grown to 350 million monthly users, up from 320 million in January. Last week, Meta announced that all “eligible advertisers globally” would have the opportunity to run ads on Threads; however, they do not anticipate a significant revenue boost from Threads ads in 2025, according to Li’s comments on Wednesday.
The Meta AI digital assistant now boasts nearly 1 billion monthly users, a rise from 700 million in January. WhatsApp remains the primary access point for Meta AI, stated Li. The company also launched a standalone Meta AI app recently, confirming a report from CNBC in February.
Zuckerberg envisions Meta AI as a potential platform for advertising and hinted at a premium version of the assistant that could be monetized later, but for now, Meta’s focus is on developing the product over the next year.
As of March 31, Meta reported a workforce of 76,834, an 11% increase from the previous year. In February, the company laid off 5% of its employees identified as low performers.
Advertising sales from the Asia-Pacific region totaled $8.22 billion in the first quarter, while analysts predicted $8.42 billion in ad sales for that region.
Li informed analysts that the company noted “some reduced spending in the U.S. from Asia-based e-commerce exporters,” attributing this to the impending end of the de minimis loophole that is set to expire on Friday.
“Some of that spending has been redirected to other markets, but overall expenditure from those advertisers remains below pre-April levels,” Li noted.
Snap issued a warning on Tuesday, and Google did so last week, indicating potential challenges in their advertising sectors due to macroeconomic uncertainties.
During its first-quarter earnings report last Thursday, Google executives informed analysts that the company is likely to face headwinds in its online ad business due to Asia. Google Chief Business Officer Philipp Schindler mentioned, “it’s still too early in the second quarter to have a clearer understanding of things.”
Snap reported its first-quarter results on Tuesday, with its stock falling after announcing that it could not offer future guidance due to macroeconomic uncertainties.
Reddit and Amazon are set to report their earnings on Thursday.