Meta Platforms’ first-quarter results exceeded analyst expectations, demonstrating the company’s ability to navigate challenges posed by reduced advertising spending from China-based e-commerce exporters like Temu and Shein. The company’s revenue jumped 16% year over year to $42.31 billion, while earnings per share surged 37% to $6.43. These results were driven primarily by Meta’s artificial intelligence (AI) investments, which have enhanced user engagement and improved ad targeting capabilities.
Strong Advertising Growth
Meta’s advertising revenue grew 16% to $41.4 billion, led by a 5% increase in ad impressions and a 10% jump in average price per ad. The company’s AI-powered recommendations have increased user time on Facebook and Instagram by 7% and 6%, respectively. This enhanced engagement has provided more opportunities for ad placement, while AI-driven ad targeting has made Meta’s platforms more attractive to advertisers, allowing the company to charge higher prices.
User Base Continues to Grow
Meta’s family daily active people (DAP) metric, which measures registered users logging into one of its apps daily, climbed 6% year over year to 3.43 billion in March. The company’s newest app, Threads, has reached over 350 million monthly active users, up from 320 million at year-end. While Threads is just beginning to introduce advertising, Meta expects it to become a meaningful contributor in the future.
Navigating Challenges
The reduction in ad spending from Chinese e-commerce exporters was largely due to the ongoing U.S.-China tariff war and the end of the de minimis exemption that previously allowed goods valued below $800 to enter the U.S. without tariffs. However, Meta reassured investors that some of this spending has been redirected to other markets. The company also significantly increased its full-year capital expenditures forecast to between $64 billion and $72 billion, primarily to support its AI initiatives and data center infrastructure.
Outlook and Valuation
Meta forecast second-quarter revenue between $42.5 billion and $45.5 billion, representing 9% to 16% year-over-year growth. The company’s strong performance and AI-driven growth prospects position it well to navigate current economic uncertainties. With a forward price-to-earnings ratio of around 23 times based on 2025 estimates, Meta’s stock appears attractively valued at current levels, making it a compelling long-term investment opportunity.
