The tech giant also revealed an increased capital expenditure plan for the year, earmarking a significant $64 billion to $72 billion. This upward revision reflects Meta's aggressive push to expand its data center infrastructure to support the burgeoning field of artificial intelligence, which the company views as a pivotal force in both strengthening and transforming its core business.
Following the earnings announcement, Meta's shares experienced a 5% surge in after-hours trading, signaling strong investor confidence.
CEO Mark Zuckerberg, during an investor call, emphasized the rapid advancements within the AI landscape and the vast opportunities it presents for Meta. "The pace of progress across the industry and the opportunities ahead for us are staggering. I want to make sure that we’re working aggressively and efficiently, and I also want to make sure that we are building out the leading infrastructure and teams," he stated.
While a substantial portion of the increased capital expenditure is earmarked for bolstering the core business, including the computing power necessary for its advertising operations, Chief Financial Officer Susan Li clarified that a significant portion of the increased forecast is strategically directed towards accelerating the readiness of data center capacity to support Meta's AI initiatives. She also noted that the potential for increased hardware export costs due to tariffs played a role in the revised spending plan.
This increased investment in AI infrastructure could potentially quell earlier concerns raised by analysts in March, who had observed initial indications of major tech companies scaling back on new data center commitments. Meta's decisive move signals a strong commitment to the AI space.
For the first quarter ending in March, Meta reported revenue of $42.31 billion, surpassing the average analyst estimate of $41.40 billion. The company also reported a profit of $6.43 per share, significantly beating the estimated $5.28 per share.
Looking ahead to the second quarter, Meta anticipates revenue to fall within the range of $42.5 billion to $45.5 billion, closely aligning with the average analyst forecast of $44.01 billion. CFO Susan Li acknowledged that this forecast was based on sales trends observed in April but cautioned that ongoing economic uncertainties made future predictions particularly challenging.
Zuckerberg underscored the strategic importance of Meta's AI investments in navigating the current macroeconomic climate, stating that these bets have positioned the company favorably. He highlighted that nearly one billion people are currently utilizing Meta's AI assistant on a monthly basis. The company's strategy for the next year will focus on driving increased user engagement with its AI features before shifting towards monetization. Furthermore, Meta is actively leveraging AI to enhance ad targeting and content recommendations for its vast user base.
Debra Aho Williamson, founder and chief analyst at Sonata Insights, commented on the results, stating, "If ad revenue continues to hold strong, then this increase in capital expenditures will be less of a bitter pill for investors to swallow."
The positive earnings reports from Meta and Microsoft also had a ripple effect on the shares of AI chip manufacturers, with Nvidia rising by 2.7% and Advanced Micro Devices increasing by 1.8%.
Resilient Advertising Performance Amidst Economic Headwinds
Meta's extensive user base continues to be a reliable platform for advertisers, particularly during a period of U.S. tariff-induced uncertainty that has prompted some companies to tighten marketing budgets and postpone campaigns.
The company's family daily active people (DAP), which tracks unique users across its suite of apps, saw a 6% year-over-year increase, reaching 3.43 billion.
Advertising remains the primary revenue driver for Meta. While industry data indicates that some major U.S. advertisers, including Chinese e-commerce giants Temu and Shein, are significantly reducing their U.S. digital ad spending, Meta appears to be weathering this trend.
This contrasts with the recent performance of smaller rival Snap, which issued a cautious second-quarter forecast, citing economic uncertainty and the end of a U.S. duty-free import loophole as factors negatively impacting its ad business, leading to a sharp decline in its share price. CFO Li acknowledged that Meta had observed some reduced spending from Asia-based e-commerce exporters, likely due to similar reasons, but noted that overall trends in April had been positive.
Emarketer senior analyst Minda Smiley suggests that Meta's established advertising reliability positions it to potentially benefit from economic instability. However, she cautioned that the company would not be immune to a broader economic downturn if advertisers implement substantial budget cuts and consumer spending declines significantly.
Navigating Regulatory Challenges
CFO Li also highlighted a significant regulatory challenge in Europe. An EU ruling finding that Meta breached the Digital Markets Act could have a substantial impact on its European business as early as the third quarter. Ad revenue from the affected regions accounted for 16% of Meta's total revenue in 2024.
Furthermore, Meta is currently engaged in a high-stakes trial in Washington, where the U.S. Federal Trade Commission is seeking to unwind the company's acquisitions of Instagram and WhatsApp, two of its most valuable assets.