Jamie Spencer
Meta (META) posted its first-quarter results after the bell on Wednesday, exceeding expectations on both earnings and revenue. Despite concerns about a potential advertising slowdown amid tariff uncertainty, the company raised its full-year capital expenditure estimate to between $114 billion and $119 billion, up from its previous forecast of $113 billion to $118 billion.
Strong Earnings and Revenue
For the quarter, Meta reported earnings per share (EPS) of $6.43 on revenue of $42.3 billion. Wall Street had expected EPS of $5.25 on revenue of $41.3 billion, according to Bloomberg consensus estimates. This marks an increase from Q1 2024, where Meta reported EPS of $4.71 on revenue of $36.4 billion. The company’s advertising revenue came in at $41.39 billion, exceeding expectations of $40.5 billion.
Optimistic Q2 Outlook Despite Tariff Uncertainty
Despite concerns over a potential advertising slowdown due to ongoing tariff uncertainty, Meta’s outlook for Q2 remains strong. The company anticipates revenue of between $42.5 billion and $45.5 billion, surpassing Wall Street’s expectations of $44 billion.
Reality Labs Segment Struggles
Meta’s Reality Labs segment, which focuses on its virtual reality and metaverse ambitions, continues to face challenges. The segment posted an operating loss of $4.21 billion in Q1, reflecting the ongoing costs associated with Meta’s significant investments in the metaverse.
Stock Performance and Market Reactions
Following the announcement, Meta’s stock rose more than 4% in after-hours trading. However, the company’s stock is still down over 7% since the start of the year, despite a 25% gain over the past 12 months.
Advertising Slowdown and FTC Legal Battles
Meta’s reliance on advertising as its primary revenue source continues to be a concern, particularly with reduced ad spend from China-based advertisers, who account for over 10% of Meta’s advertising revenue. Jefferies analyst Brent Thill noted that this could be a contributing factor to the company’s weaker performance in the advertising sector.
Meta is also embroiled in a legal battle with the Federal Trade Commission (FTC), which is attempting to break up the company due to its alleged monopoly over “personal social networking.” The FTC is seeking to force Meta to sell off Instagram and WhatsApp. Although Meta CEO Mark Zuckerberg offered to settle for $1 billion, the FTC has pushed for a much higher sum, reportedly asking for $18 billion.
Meta’s Relationship with President Trump
In recent months, Zuckerberg has met with President Trump in an effort to strengthen their relationship. Zuckerberg attended Trump’s inauguration in January, and Meta donated $1 million to the inauguration fund. Additionally, Meta reached a $25 million settlement with Trump related to the company’s decision to ban him from its platforms after the January 6th Capitol attack.
