ii view: big spending Meta Platforms beats forecasts

First-quarter results to 31 March

• Revenue up 16% to $42.31 billion
• Adjusted earnings per share up 37% to $6.43
• Cash and equivalents held of $70.2 billion

Guidance:

• Expects second-quarter revenue of between the range of $42.5-45.5 billion
• Expects full-year capital expenditure of $64-72 billion, up from a previous $60-65 billion estimate

Chief Executive Mark Zuckerberg said:

"We've had a strong start to an important year, our community continues to grow and our business is performing very well." 

• Invest with ii: Buy US Stocks from UK | Most-traded US Stocks | Cashback Offers

ii round-up:

Facebook owner Meta Platforms Inc Class A (NASDAQ:META) reported better than expected sales and earnings but increased expected annual expenditure on products such as AI, potentially to assist with the added cost of trade tariffs.

Sales in the first quarter to late March rose 16% to $42.31 billion, fuelling earnings growth of 37% to $6.43 per share. Wall Street had forecast $41.4 billion and $5.28 per share respectively. Full year 2025 expenditure is now expected to be as much as $72 billion, up from a previous maximum of $65 billion. 

Shares in the Nasdaq 100 company are up 5% following the results having fallen by a similar amount year-to-date. That’s much the same as the tech-heavy index itself. Fellow advertiser Google owner Alphabet Inc Class A (NASDAQ:GOOGL) is down around 16% in 2025. 

Meta operates across the two businesses of Apps, which includes Facebook, Instagram, Messenger and WhatsApp, as well as virtual reality (VR) gaming and metaverse interests under its reality labs division. 

Profit in the core app division hit $21.8 billion in the quarter, up from $17.7 billion a year ago and driven by ad sales of $41.4 billion. Losses for reality labs increased to $4.2 billion, up from $3.8 billion in Q1 2024. 

Meta expects second-quarter revenues of between $42.5 billion and $45.5 billion, broadly in line with Wall Street forecasts. Accompanying management comments post the results, however, did flag some recent slowing of ad demand via online seller based in Asia.   

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, raising its estimate of fair value to $650 from $615 per share.  

ii view:

Started in 2004 by Mark Zuckerberg, Meta today employs just over 76,000 people. Ad impressions via the group’s family of apps rose 5% year-over-year, with the average price per ad climbing 10%. Geographically, the US generated its biggest chunk of revenues in 2024 at 36%, followed by Europe at 23%, Asia-Pacific at 16%, China and the Rest of the World at around 11% each and Canada the balance of 3%.

For investors, US trade tariffs could potentially cause a slowing in ad demand from Asia based online retailers given the jump in their sale prices and reduced competitiveness. Investments made by Meta in AI are not guaranteed to pay off. Government concerns globally regarding possible misinformation potentially spread by social media persist, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. 

• Stock market winners and losers during Trump’s first 100 days
• Investing through the storm: Q&A with ii experts on market volatility
• Stockwatch: is trade tariff risk really receding?

More favourably, Meta is driving the use of its own AI tech to help tailor and target advertising for its customers. Group investment remains significant. A firm focus on costs persists, while the previous commencement of a dividend payment and forward dividend yield of 0.4% could increase its shareholder base to include those seeking a progressive annual payment. 

In all, and while risks have arguably increased, Meta is now a big focus for corporate advertisers, with a consensus analyst fair value estimate above $700 per share suggesting optimism on Wall Street. 

Positives

• Broad base of 10 million plus advertisers
• Cash and cash equivalents held of $70.2 billion

Negatives

• Uncertain economic outlook
• A series of scandals have previously impacted

The average rating of stock market analysts:

Buy