Meta, formerly known as Facebook, is set to reveal its second-quarter earnings after the close of regular trading on Wednesday. Analysts are eagerly awaiting the results to see if the company has managed to meet expectations. The consensus among analysts polled by LSEG is that Meta will report earnings per share of $4.73 and revenue of $38.31 billion.
Wall Street is keeping a close eye on Meta’s anticipated sales growth, with expectations set at 20% from the previous year. This increase from $32 billion to $38.31 billion signifies a recovery for Meta’s business following a challenging year in 2022. Advertisers had significantly cut back on their spending due to economic hardships, but Meta seems to be on the path to regaining its momentum.
While Meta’s core ad business has traditionally been the driving force behind its success, investors are now turning their attention towards the company’s substantial investments in artificial intelligence and the metaverse. Meta, like other tech giants, has been heavily investing in data center infrastructure and computing resources necessary for training AI models and managing large workloads.
CEO Mark Zuckerberg has acknowledged concerns about overspending in Meta’s AI buildouts, but maintains that these investments are essential for positioning the company for future growth. Zuckerberg emphasized the importance of not falling behind in technological advancements, as it could hinder Meta’s competitiveness over the next decade.
In April, Meta announced that its capital expenditures for 2024 would be between $35 billion to $40 billion, surpassing its previous forecast. Zuckerberg revealed plans to incorporate 350,000 Nvidia H100 graphics cards for training AI models by the end of 2024. The company’s computing infrastructure is expected to also include “almost 600k H100 equivalents of compute,” indicating a significant financial commitment.
Google’s CEO Sundar Pichai recently highlighted the importance of consistent investment in AI technologies, noting that the risk of underinvesting may outweigh the risk of overinvesting. Meta’s recent launch of the Llama AI model showcases its commitment to staying competitive with other tech giants like OpenAI and Google in the AI space.
As Meta prepares to release its earnings report, the digital ad market has experienced some challenges. Alphabet reported lower-than-expected ad revenue from YouTube, while Pinterest issued disappointing guidance for the third quarter. These setbacks have raised concerns about the overall strength of the ad industry and its impact on companies like Meta.
Meta’s Reality Labs division, responsible for metaverse technologies, is facing financial difficulties with significant operating losses. Analysts predict an operating loss of $4.55 billion, bringing the total losses to approximately $50 billion since late 2020. Despite this, revenue within the division is expected to grow by 34% from the previous year, primarily driven by the sales of Quest VR headsets and smart glasses.
Meta’s upcoming earnings report will shed light on its financial performance and strategic investments in AI and the metaverse. The company’s ability to navigate the challenges of the digital ad market and address the financial struggles in its Reality Labs division will be closely monitored by investors and industry analysts alike. As the competition in AI technologies continues to intensify, Meta’s future trajectory will depend on its ability to innovate and adapt in a rapidly evolving digital landscape.