Meta rises 2.6% in premarket, to release 1Q results after the bell

Meta rises 2.6% in premarket, to release 1Q results after the bell

As the clock ticks down to Meta Platforms (META) first quarter earnings report, the anticipation is palpable. With the Facebook parent company's stock surging nearly 40% this year and 130% over the past twelve months [1], the stakes couldn't be higher. As we delve into the key factors that will shape Meta's Q1 financials, it's crucial to remember the backdrop of a dynamic market landscape [1].

One of the most significant aspects of Meta's earnings report will be the company's spending habits. Analysts predict Meta will generate sales of $36.14 billion, a 26% year-over-year increase [1]. This revenue growth acceleration is noteworthy, and it raises the question of how Meta will balance its expenses against its revenue growth. The company's recent investments in large language models, metaverse-focused Reality Labs, and custom computing chips have resulted in increased capital expenditures [1]. While Meta's CFO, Susan Li, has mentioned that the company is investing to support its work in AI, further increases in spending expectations could raise eyebrows among investors [1].

Another critical factor in Meta's Q1 earnings report will be the performance of its advertising business. Digital ad sales contributed 97% of Meta's revenue in the fourth quarter [1]. For the first quarter, analysts project that advertising sales will drive 98% of Meta's revenue, with a growth rate of 26% to $35.4 billion [1]. The success of Meta's advertising business will be closely watched, as it is the primary driver of the company's revenue growth.

A potential risk for Meta in Q1 is the performance of its advertising business in China, which accounted for about 10% of Meta's total ad sales last year [1]. Any slowdown in advertising spending from Chinese advertisers could impact Meta's financials.

In conclusion, Meta's Q1 earnings report will provide valuable insights into the company's financial performance, growth strategies, and investment decisions. With a focus on balancing expenses against revenue growth, the success of Meta's advertising business, and potential risks from Chinese advertisers, investors will be closely watching Meta's report.

References:

[1] Investor's Business Daily. (2023, April 10). Meta earnings Q1 preview: Spending, ads growth. https://www.investors.com/news/technology/meta-earnings-q1-preview-spending-ads-growth/