Meta's Advertising Power Surges: AI Investment Boosts Earnings Amid Economic Headwinds

Meta Platforms Inc. recently reported first-quarter earnings that surpassed Wall Street expectations, underlining the resilience of its advertising business despite ongoing tariffs tensions under the Trump administration. The social media giant, which owns Facebook and Instagram, announced revenue of $423 billion for the quarter ending March 31, exceeding the anticipated $414 billion. The company also affirmed that its revenue for the current quarter is expected to align with analyst predictions, with a noteworthy increase in spend directed towards artificial intelligence (AI) development.

During an earnings call, CEO Mark Zuckerberg assured investors that Meta is equipped to handle macroeconomic uncertainties. For Meta, advertising—which constitutes 98% of its revenue—must continue to expand to fuel its costly AI investments. Currently, AI is enhancing ad targeting and personalizing user content across social networks.

Meta plans to spend between $64 billion and $72 billion, a significant increase from its prior projection of $60 billion to $65 billion. This adjustment reflects higher investment in data centers and infrastructure hardware to support its AI initiatives, according to the company.

Following the earnings announcement, Meta's stock saw a remarkable after-hours increase of over 6%, closing the session at $549. This performance outpaced the broader market slump, a consequence of tariffs and macroeconomic pressures, and stood stronger relative to many major U.S. tech stocks. Related stocks such as AI computing devices manufacturer Nvidia also experienced after-hours gains.

Despite the challenging economic landscape, Meta stood out by providing forward guidance—a move viewed positively. Zacks Investment Research strategist Andrew Rocco highlighted the company's predictions for the second quarter and the projected growth in capital expenditures as beneficial for the broader AI sector.

Meta posted a 37% increase in per-share earnings, reaching $6.43, comfortably beating the analyst forecast of $5.25. As Meta endeavors to maintain its advertising strength, these results present a promising outlook, steering through trade tensions and underscoring a robust AI-driven strategy.