What You Need To Know Ahead of Meta’s Earnings Report

Key Metric: Ad Revenue Growth

Analysts are watching for strong growth in Meta’s advertising revenue.

CFRA analysts project that Meta’s first-quarter earnings report could show advertising revenue will grow 26%, which “likely mark[s] a peak growth rate.” The analysts said that healthy digital ad spend, AI integration, and strength from Chinese advertisers could be drivers for ad growth, but noted that they “partly attribute the strong growth rate to lapping a low bar a year ago.”

Wedbush Securities analysts increased the company’s price target to $570 from $520, citing the pace of anticipated growth compared with competitors, improvements in monetization, changes in demand from advertisers in China, impacts of AI initiatives, and expected operating margin expansion in 2024. The analysts wrote that they “see a strengthening digital advertising environment heading into 1Q results,” highlighting Meta and Alphabet (GOOGL) as major benefactors.

Jefferies research analysts said that Meta “could capture 50% of incremental industry ad dollars in 2024, which would be its highest ever and well above its 33% in 2023” as “scaling Gen AI ad tools supplement Meta’s already best-in-class Advantage+ [advertising] product suite.” Meta’s ad business in 2024 could also outgrow Amazon’s (AMZN) for the first time since 2015,” they said.

Business Spotlight: Updates on AI Initiatives

Meta could offer updates with its first-quarter earnings about how it has integrated AI into to its ranking and recommendation engines. The company recently unveiled its latest custom AI chip, the Next Gen Meta Training and Inference Accelerator (MTIA).

The company also could give investors updates about its continuing AI initiatives and how they are affecting Meta’s bottom line.

Meta shares were up 2% to $504.10 as of 2 p.m. ET Thursday and have gained more than 42% so far this year.