When Meta Platforms Inc. reports earnings on Wednesday afternoon, the social media giant will face a high hurdle to satisfy anxious investors.
The Facebook owner’s shares have fallen the least of any Big Tech company during the market selloff that’s hammered the sector this year. Meanwhile, better-than-expected results from Alphabet Inc. last week raised expectations for the digital advertising ecosystem at a time of widespread uncertainty about how the Trump administration’s tariffs will hit the business. Snap Inc.’s results on Tuesday ratcheted up concerns about a decline in ad pricing.
“Google’s surprise to the upside puts a lot of pressure on Meta,” said Brian Mulberry, a client portfolio manager at Zacks Investment Management. “It’s going to be interesting to see what their ad business looks like. There’s definitely some growing expectations based on what Google did.”
The earnings season comes at a tumultuous time for technology stocks, with the headwinds from tariffs and questions about whether the biggest tech companies will have to trim some of their huge spending plans for artificial intelligence. Meanwhile, both Meta and Google are facing antitrust trials in Washington.
So far, Meta’s shares haven’t been hit as hard as the rest of its Magnificent Seven peers. Despite dropping significantly from a February peak, the stock has only shed around 9% so far this year, making it the best performer of the megacap technology group outside of Microsoft Corp. The stock currently trades at about 20 times forward earnings, roughly in-line with its 10-year average and below the Nasdaq 100 Index at 23 times.
Shares fell 3.6% on Wednesday, participating in a widespread equity selloff. Snap, Meta’s much smaller peer, sank 16% in the wake of its own results, where it didn’t give an outlook owing to economic uncertainty.
Investors will be looking for any guidance on the impact of the trade war on advertising spending and Meta’s business in China. China made up 11% of Meta’s total revenue in 2024, according to company filings. Much of that revenue was likely driven by Temu and Shein, according to Benchmark analysts led by Mark Zgutowicz, both of which have hiked prices due to tariffs.
“Meta’s ad-pricing growth could face headwinds as large Chinese advertisers such as Temu and Shein are likely to pull back amid the rising trade war with China,” Bloomberg Intelligence analyst Mandeep Singh wrote in an April 14 note.
Analysts aren’t currently expecting that to have weighed too heavily on the first quarter, and see Google’s results as proof. YouTube revenues were in-line in the period, which is “a slightly positive read across” for Meta’s ad revenue, Bank of America analysts led by Justin Post wrote in an April 25 note.
“Ad sales did not fall off a cliff yet, and Meta is more target marketing” than Google, said Ken Mahoney, CEO of Mahoney Asset Management, adding that both companies have sidestepped some of the worry about tariffs and supply chains because they focus on software rather than hardware.
Alphabet also set a high bar when it announced its board had authorized a $70 billion buyback and boosted its dividend, returning some of the cash on its deep balance sheet to investors. Investors will be watching carefully to see if Meta takes a similar approach.
“If there really were concerns about slowing revenue and slowing growth, you’d think they’d keep that cash on hand to have liquidity to adapt to whatever’s changing in the economic environment,” Mulberry said of Google’s buyback.
Capital expenditures are also top of mind heading into Meta’s results. Earlier this year, the company said that it expects to spend as much as $65 billion on AI-related projects as well as its core business in 2025, much higher than Wall Street previously expected. That amount has been thrown into question, given the current macroeconomic backdrop. But if the spending plans remain on track, it could signal that the company sees future growth in AI.
“Underneath the headlines, the AI spend is still going, the competition with the hyperscalers is still happening,” said Mahoney, adding that he expects Meta to reaffirm its commitment to AI and heavy promised spending.
There could, though, be trouble if Meta offers any forward-looking guidance. The friendly reaction to Alphabet’s earnings report hinged partly on the fact that the company didn’t provide forward expectations. That’s become a theme of the earnings season, as many companies have slashed or done away with future guides saying they just can’t forecast given current uncertainty.
“I don’t know how they see four feet in front of them,” Mahoney said.
Wall Street expects that Meta will report $41.38 billion in revenue in the quarter, a 14% increase from the same period a year earlier. GAAP earnings per share are expected to be $5.27, 12% higher than last year.
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Samsung Electronics Co. reported slower profit growth and softening demand for storage chips, a sign that the US-China trade war may be triggering cuts in artificial intelligence hardware spending. The South Korean company’s flagship products such as semiconductors, smartphones and tablets are now exempt from the so-called reciprocal tariffs, but President Donald Trump has indicated that a tariff on the electronics supply chain including chips is in the works.
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