After integrating artificial intelligence into its products, Meta Platforms, Inc. (NASDAQ: META) is investing heavily in the metaverse project. Yet, the tech giant has maintained healthy cash flows and consistently delivered revenue and income growth in recent quarters. The company is preparing to report Q1 earnings, with concerns growing that the new China tariffs could weigh on its advertising revenue as Chinese e-commerce firms reduce ad spending.
Estimates
The Facebook parent will report first-quarter results on Wednesday, April 30, at 4:40 pm ET. It is estimated that earnings per share rose to $5.22 in Q1 from $4.71 in the corresponding quarter of 2024. Market watchers’ consensus revenue estimate for the March quarter is $41.36 billion, representing a 13.5% YoY growth.
Meta’s stock has lost around 28% since peaking in mid-February and slipped below its 12-month average price. Long-term investors wouldn’t want to miss this opportunity to invest, given the favorable valuation and the company’s solid fundamentals. The stock regained strength this week and is maintaining the momentum ahead of the earnings.
Strong Q4
In the final three months of FY24, the company’s revenue rose 21% annually to $48.39 billion. Family Daily Active People, which refers to the total number of registered and logged-in users who visited at least one of Meta’s core products on a given day, increased 5% year-over-year to 3.35 billion in Q4. Net income increased 49% to $20.84 billion and earnings per share rose 50% to $8.02 compared to Q4 2023. Revenue and earnings both beat estimates, continuing a streak of quarterly beats for over two years.
Meta’s CEO Mark Zuckerberg said in the Q4 earnings call, “This is going to be a really big year. I know it always feels like every year is a big year, but more than usual, it feels like the trajectory for most of our long-term initiatives is going to be a lot clearer by the end of this year. So, I keep telling our teams that this is going to be intense because we have about 48 weeks to get on the trajectory that we want to be on. In AI, I expect that this is going to be the year when a highly intelligent and personalized AI assistant reaches more than 1 billion people, and I expect Meta AI to be that leading AI assistant.”
Headwinds
While the management is bullish on the company’s long-term growth prospects, continuing operating losses in its metaverse division and growing competition in the digital advertising space can be a drag on overall performance. Last year, revenue from China-based advertisers accounted for more than 10% of Meta’s total ad revenue. This share may decline as the US-China trade tension escalates, particularly with rising import tariffs.
On Thursday, META opened at $518.73 and was trading up 2% in the afternoon. It has lost about 14% in the past 30 days.
