Meta Earnings Preview: AI Push, CapEx Scrutiny, and Advertising in Focus

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Meta Platforms (META) is set to report its Q2 2025 earnings after the close on Wednesday, with Wall Street sharply focused on the company’s aggressive AI push and the growing capital expenditures tied to it. CEO Mark Zuckerberg has been on a high‑profile talent recruitment spree, offering nine‑figure packages to lure AI researchers from Apple, OpenAI, and Scale AI. This drive has investors watching whether Meta’s soaring CapEx—guidance now at $64 billion to $72 billion for 2025—can deliver returns without compressing margins. Alongside AI, advertising revenue remains under the microscope, as Meta seeks to monetize newer platforms like WhatsApp and Threads while facing headwinds from tariff and regulatory shifts.

Key Metrics and Analyst Expectations

Consensus estimates call for Q2 revenue between $42.5 billion and $45.5 billion, with consensus midpoint at approximately $44.8 billion, representing a roughly 15% year‑over‑year gain. EPS is projected at $5.83, up nearly 13% from last year. Analysts expect operating profit around $17.1 billion, with Reality Labs continuing to post a loss of roughly $4.9 billion. Notably, CapEx guidance has risen again from $60–65 billion earlier this year to $64–72 billion, underscoring Meta’s AI infrastructure build‑out. Expenses are expected to land between $113 billion and $118 billion, down from prior forecasts, providing some offset to investor concerns around the cost of AI.

Advertising remains the core growth engine. Average price per ad grew 10% in Q1, and impressions increased 5%, trends the Street expects to hold in Q2. Analysts also expect continued momentum from AI‑driven recommendation algorithms—particularly the Llama model—that boosted time spent on Facebook and Instagram by mid‑single digits last quarter.

Recap of Q1 Results and Guidance

Meta delivered a strong Q1, reporting $42.3 billion in revenue, up 16% year‑over‑year, with a 41% operating margin. Ad revenue totaled $41.4 billion, driven by strong demand in North America and Europe. Engagement metrics were strong: Threads surpassed 350 million monthly active users, and Meta AI nearly reached one billion active users. Free cash flow came in at $10.3 billion, while the company repurchased $13.4 billion in shares, leaving Meta with $70.2 billion in cash and securities. At the time, management raised full‑year CapEx guidance and lowered its expense forecast, moves investors viewed as evidence of discipline amid heavy AI investment.

AI Investment and CapEx Spotlight

AI dominates the Meta narrative. Zuckerberg has committed “hundreds of billions” of dollars toward compute infrastructure, including multi‑gigawatt data centers codenamed Prometheus and Hyperion. Analysts at Bank of America noted these investments underscore Meta’s ambition to lead in AI superintelligence, though they caution the scale raises questions about return on capital and free cash flow. Benchmark expects Q2 guidance to maintain the elevated CapEx, while tightening opex slightly higher due to recent AI hires. UBS and Piper both flagged Meta’s AI initiatives—tools like GEM, Andromeda, and Lattice—as drivers of mid‑teens revenue growth through the decade.

Investor anxiety centers on whether computing bottlenecks are forcing Meta to spend more for the same capacity, particularly as rivals like Alphabet just raised CapEx by $10 billion. CFO Susan Li previously admitted supply constraints were straining Meta’s ability to meet demand for AI workloads, raising the odds that 2025 CapEx could ultimately exceed $72 billion.

Advertising Revenue and New Surfaces

Analysts see AI as a tailwind for advertising efficiency. Bernstein and Piper highlighted AI‑enhanced ad targeting and creative tools as boosting returns for advertisers, while WhatsApp’s rollout of promoted channels and status ads provides a new monetization lever. Threads, which saw a 35% increase in user time in Q1, now has ads in over 30 markets. While CFO Li tempered expectations, noting Threads won’t materially drive revenue this year, analysts will be watching for signs of user stickiness amid the ad rollout.

Nike’s analyst upgrades this week also point to a supportive advertising environment in the U.S., with JPMorgan citing high‑teens earnings growth across digital ad platforms, including Meta.

Legal and Regulatory Developments

Meta continues to face regulatory scrutiny. A Delaware judge confirmed a settlement in the $8 billion shareholder lawsuit over Facebook’s past user privacy violations, removing one legal overhang. However, antitrust investigations remain active in the U.S. and Europe, with uncertainty over compliance costs tied to the EU’s Digital Markets Act. Analysts at Needham, who recently upgraded the stock to Hold, noted Meta’s strong global scale and ad model but flagged risks from regulatory costs and stock‑based compensation dilution.

M&A and Strategic Initiatives

During Q2, Meta held acquisition talks with AI startup Perplexity before walking away, later striking a $14 billion deal to invest in Scale AI and hire its co‑founder Alexandr Wang. These moves reinforce Zuckerberg’s frustration at being perceived as behind OpenAI and Google in the AI race. Meanwhile, Meta expanded its AI hardware push with limited‑edition Oakley smart glasses and its partnership with Anduril to boost Reality Labs.

Analyst Sentiment and Stock Context

META shares are up more than 30% since Q1 earnings and have more than doubled since early 2024. Analysts remain overwhelmingly bullish, with over 90% rating the stock a Buy or Strong Buy. Price targets have climbed in tandem.

Looking Ahead

The Q2 report will test whether Meta can balance soaring AI investment with continued earnings growth. Investors will focus on:

• Revenue & EPS: Can Meta top consensus $44.8B revenue and $5.83 EPS?
• CapEx Guidance: Will 2025 forecasts rise again amid compute bottlenecks?
• Advertising Trends: Are AI tools and WhatsApp monetization offsetting risks from tariff shifts and weaker Asia‑based ad spend?
• Regulatory Costs: How are lawsuits and compliance obligations shaping 2025 expense guidance?

Meta’s results arrive amid a busy earnings week for Big Tech, with Microsoft, Amazon, and Apple also reporting. With AI now the central narrative across the sector, Wednesday’s call will be a litmus test for whether Meta can justify its spending spree with tangible returns.