Meta Platforms (NASDAQ:META) exceeded market expectations for its second-quarter revenue on Wednesday and provided an optimistic sales forecast for the third quarter, signaling that strong digital ad spending on its social media platforms can offset the costs of its AI investments.
For the quarter ending June 30, Meta reported earnings of $5.16 per share on revenue of $39.07 billion, surpassing estimates of $4.70 per share and $38.26 billion.
Daily active people (DAP) reached 3.27 billion, a 7% increase from the same period last year.
Shares in the Facebook parent popped 7% in premarket trading Thursday.
Capital expenditures (capex) were $8.47 billion in Q2, up from $6.72 billion in Q1. Despite a 7% rise in costs during the second quarter, the substantial revenue increase led to a 9-point rise in operating margin, climbing to 38% from 29%.
Looking ahead to Q3, Meta projected total revenue to range between $38.5 billion and $41 billion, with a midpoint of $39.75 billion, surpassing Wall Street's estimate of $39.09 billion.
The company also indicated it would continue significant spending on AI infrastructure, forecasting 2024 capital expenditures between $37 billion and $40 billion, up from the previous forecast of $35 billion to $40 billion.
Meta maintained its total expense forecast for the year at $96 billion to $99 billion but warned that infrastructure costs would remain a "significant driver" of expense growth in 2025.
Analysts comment on Meta’s report, announce PT hikes
Following the report’s release, numerous Wall Street analysts shared predominantly bullish comments on Meta stock, raising their estimates and price targets.
“We emerge from 2Q24 earnings incrementally positive on shares of Meta given engagement & monetization gains and expanding margins,” said Citi analysts, who raised their META target price from $550 to $580.
“On engagement, we note newer AI content recommendation models continue to drive usage across Meta’s Family-of- Apps as newer AI-based use cases emerge, like search with Meta AI and Agents with AI Studio. And, while Meta is clearly ramping its investment across its Foundation Models, we believe these investments can deliver tangible short & long-term benefits.”
Meanwhile, JPMorgan analysts said Meta “continues to earn the right to spend big on GenAI” given the company’s strong revenue outlook and greater clarity on the AI product roadmap.
The Wall Street firm set its December 2025 price target for Meta stock as high as $610, up from the $480 for December 2024.
“GenAI will require significant infrastructure investments to train the next generation of large foundational models & Meta is getting ahead of a multi-year capacity ramp, although core products will remain the primary driver of monetization through 2026,” JPMorgan analysts wrote.
Other investment firms also voiced largely bullish remarks.
Evercore ISI: “The stock rightfully traded up 7% in the aftermarket, with META demonstrating very strong Ad revenue growth -- especially with its Q3 outlook -- ongoing product improvements, and significant margin expansion.”
“Looking for returns on aggressive industry AI spend? Look no further. META has already effectively deployed AI to materially boost its consumer offerings and its advertiser offerings. And there is much more to come. And valuation is still highly reasonable at 21X P/E.”
Citizens JMP: “While Meta’s AI investment cycle is nowhere near done, the company is well positioned to continue to realize AI gains given its distribution with 3.3B people using its apps daily, while simplifying the advertising process for businesses helps to unlock latent demand from both consumers and advertisers.”
“As we look over the next few years, growth looks increasingly sustainable, while we can see the company laddering products to sustain growth and we continue to view Meta as a core holding for technology investors as we think estimates can continue to surprise to the upside.”
Morgan Stanley: “META remains the best case study of how GPU-enabled analyses of leading first party data sets can drive material improvements. In this case it comes thru as better engagement and revenue growth (even off of large bases) and a growing list of next gen call options.”