Meta Platforms Q2 Earnings Preview: Earnings Estimates, What Analysts Are Saying, Key Factors To Watch (Including AI)

Social media platform company Meta Platforms META is set to report second-quarter financial results after market close Wednesday. Here’s a look at the earnings estimates, what analysts are saying, and key points to watch.

Earnings Estimates: Analysts expect Meta Platforms to report second-quarter revenue of $31.12 billion, according to data from Benzinga Pro.

The company reported $28.82 billion in revenue in the second quarter of the last fiscal year, and $28.65 billion in the first quarter of the current fiscal year.

Meta Platforms has beaten revenue estimates from analysts in three of the last four quarters, including the most recent first quarter.

Guidance from Meta Platforms calls for second-quarter revenue in a range of $29.5 billion to $32 billion.

Analysts expect the company to report earnings per share of $2.91 in the second quarter. The company reported earnings per share of $2.46 in the second quarter of last year and $2.20 in the first quarter of the current fiscal year.

Meta Platforms has missed earnings per share estimates in three of the last four quarters.

In the first quarter, Meta Platforms beat on both revenue and earnings per share. The company reported 3.02 billion family daily active people and 3.81 billion family monthly active people, both figures were up 5% year-over-year.

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What Analysts Are Saying: New Street Research analyst Dan Salmon highlighted two catalysts for Meta Platforms ahead of the earnings report.

The analyst, who upgraded shares from Neutral to Buy and has a $350 price target, said the release of Llama 2 and the company’s artificial intelligence initiatives were the two elements to watch.

Salmon sees more monetization opportunities for the company’s WhatsApp and Messenger platforms thanks to the growth of artificial intelligence, virtual reality and augmented reality.

The analyst also said the growth of Reels will be closely monitored as the company looks to digital advertising as a key revenue driver going forward.

Benchmark analyst Mark Zgutowicz is less bullish on the quarter for Meta Platforms, with risks of TikTok’s competition and limited Reels revenue.

Zgutowicz, who has a Hold rating on shares, sees pressure on advertising given the company’s heavy reliance on small businesses.

JMP Securities analyst Andrew Boone raised the price target on Meta Platforms from $300 to $350 in mid-July.

“We believe Meta is in the early stages of benefiting from multiple product catalysts, including Reels, AI and cost discipline,” Boone said, as shared by Yahoo Finance.

The analyst said Facebook and Instagram could see increased engagement in the quarter.

“We think our increased estimates remain conservative as we continue to believe shares can move higher.”

Key Items to Watch: One of the key items to watch for Meta Platforms will be its advertising revenue. In the first quarter, the company reported ad impressions delivered were up 26% year-over-year, but the average price per ad was down 17% year-over-year.

Rivals who have reported quarterly earnings this week have seen upticks in advertising revenue.

Microsoft Corporation MSFT reported search and news advertising revenue was up 8% year-over-year in the fourth quarter.

Alphabet Corporation GOOGGOOGL reported Google Search and YouTube both saw revenue come in higher than the previous year period.

The rise of artificial intelligence will also be a key topic for analysts and investors to watch. In the first quarter, Meta Platforms CEO Mark Zuckerberg highlighted the opportunity for the company.

“Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision,” Zuckerberg said.

Boone highlighted generative AI as being a key focus from Zuckerberg in recent months.

“CEO Mark Zuckerberg recently said on a podcast that he wants advertisers to simply give Meta a budget and objective, and the company will take care of the rest; we expect generative AI to be key in automating more steps of campaign creation,” Boone said.

Meta Platforms launched Threads, a potential competitor to Twitter, on July 6. While the early results of the rollout won’t be included in the second quarter results, this marks the first quarter for the company to report since the rollout. This could be the first time analysts and investors get key figures and hear from the company directly on the early success.

META Price Action: Meta shares are trading higher on Wednesday at $300.72 versus a 52-week trading range of $88.10 to $318.68.

Shares were up 9% in after-hours trading after first-quarter results were reported. Shares climbed 18% in after-hours trading after fourth-quarter results were reported.

Shares of the company have rebounded nicely from a rough 2022 that saw Zuckerberg lose a large portion of his net worth. Zuckerberg is now back up to being the ninth-richest person in the world with a wealth of $107 billion and a gain of $61.6 billion, according to Bloomberg.

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Photo: Anthony Quintano on Flickr