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Meta is scheduled to report its second-quarter earnings after the close of regular trading on Wednesday. Analysts polled by LSEG anticipate the company will deliver earnings per share (EPS) of $4.73 and revenue of $38.31 billion.
This forecast represents a substantial 20% increase in sales from $32 billion a year ago, driven by a recovery in ad revenue following a challenging 2022. Meta’s ad revenue is projected to rise by 19% to $37.6 billion.
Beyond its core advertising business, investors are closely watching Meta’s significant investments in artificial intelligence (AI) and the metaverse. CEO Mark Zuckerberg has highlighted the company’s substantial spending on data center infrastructure and AI computing resources, crucial for training advanced models and managing large-scale workloads.
In April, Meta raised its 2024 capital expenditure forecast to between $35 billion and $40 billion, up from a previous estimate of $30 billion to $37 billion. Zuckerberg has previously stated that Meta’s infrastructure will include 350,000 Nvidia H100 graphics cards by the end of 2024, with total computing power amounting to nearly 600,000 H100 equivalents.
Zuckerberg has acknowledged the risks of potentially overspending on AI but emphasized the necessity of such investments to stay competitive. This sentiment mirrors comments from Alphabet CEO Sundar Pichai, who highlighted the importance of overinvesting in critical technologies.
Meta recently unveiled the latest version of its Llama AI model, which includes three variants available for free to developers, positioning itself as a serious contender in the AI space alongside OpenAI and Google.
However, the digital ad market has shown some volatility. Alphabet reported weaker-than-expected ad revenue from YouTube last week, and Pinterest’s disappointing third-quarter guidance led to a 15% drop in its stock after hours.
Meta’s Reality Labs division, responsible for its metaverse initiatives, continues to face financial challenges. Analysts project an operating loss of $4.55 billion for the unit, accumulating total losses of around $50 billion since late 2020. Despite this, revenue for Reality Labs is expected to increase by 34% year-over-year to $371 million, driven by sales of Quest VR headsets and smart glasses.