Meta beats earnings expectations in first quarter 2025

Meta's earnings are out, and once again they beat expectations.

Revenue: Up 16% YoY
Ad revenue: Up 13% YoY
Daily active users (Family Active People): Up 6% YoY

But...

Capex is also up (now $64-$72B, previously $60-$65B)
Q2 2025 revenue growth outlook is lower: between 9% and 16.5% YoY, down from 22% in Q2 2024

Q1 was a good quarter for Meta, but it was before the economic turmoil really kicked in and before the seesaw of the tariffs began. It was also before we started to see pullbacks in ad spending from China-based advertisers like Temu and Shein.

Going forward into Q2, if Meta can continue to improve its AI-driven ad performance and targeting tools, it will be able to withstand any shortfall in revenue from China advertisers. Meta's increased capex spending is concerning, but if revenue growth stays strong, investors will be more inclined to accept it.

Many Wall Street analysts believe ads in Meta AI will become a new growth driver for the company. I fully expect Meta to roll out ads in its AI experiences, including its new Meta AI standalone app, but I'm not expecting to see them in 2025.

*****

Thank you to all the media outlets that featured my commentary in their reporting on Meta quarterly earnings this week:

Investor’s Business Daily: Meta Q1 Earnings On Deck After Pair Of Big AI Updates. Here's What To Watch

"Q1 was likely another solid quarter for Meta, because the impact of tariffs hadn't yet kicked in," said Debra Aho Williamson, an analyst with Sonata Insights, in a research note Monday. "Q2 will be a different story, as investment from China-based advertisers is likely to plunge."

Associated Press: How AI helped Meta beat Wall Street’s Q1 Predictions

It was “a good quarter for Meta, but it was before the economic turmoil really kicked in and before the seesaw of the tariffs began,” said Sonata Insights chief analyst Debra Aho Williamson. “It was also before we started to see pullbacks in ad spending from China-based advertisers like Temu and Shein.” Going forward, she added, Meta should be able to withstand any revenue shortfall from advertisers from China if it can continue to improve its AI-driven advertising tools.

Reuters: Meta’s strong ad sales dampen tariff-induced fears

Still, the increased spending represents a red flag due to market concerns over economic turmoil, said Debra Aho Williamson, founder and chief analyst at Sonata Insights. "If ad revenue continues to hold strong, then this increase in capital expenditures will be less of a bitter pill for investors to swallow," Williamson said.

AFP: Meta quarterly profit climbs despite big cloud spending

Meta's first-quarter earnings came "before the economic turmoil really kicked in and before the seesaw of the tariffs began," and China-based advertisers like Temu and Shein cut ad spending, said Sonata Insights chief analyst Debra Aho Williamson. "If Meta can continue to improve its AI-driven ad performance and targeting tools, it will be able to withstand any shortfall in revenue from China advertisers," Williamson said.

CNBC: Meta’s AI spending comes into focus amid Trump’s tariff policies

A stand-alone Meta AI app could help the company better market the digital assistant and distinguish it from rivals, said Debra Aho Williamson, founder and chief analyst at Sonata Insights. “ChatGPT has such wide brand awareness, that it’s become a moat that is soon going to be very hard to overcome,” Williamson said.