Meta surges on bold AI spend – but tariff risks loom
Meta platforms delivered strong first quarter earnings after market close on Wednesday, with revenue and profit surpassing Wall Street expectations thanks to continued growth in advertising and an aggressive push into AI.
But the firm’s exposure to global trade tensions and regulatory headwinds in its European market present a complicated picture for investors evaluating the tech giant’s future.
A solid first quarter
For the quarter ending in March 2025, Meta posted revenue of $42.3bn (£31.84bn), a 16 per cent increase year over year, and a net income of $16.64bn (£12.52bn) – up 35 per cent.
Earnings per share easily topped analyst estimates of $5.28 (£3.97), hitting $6.43 (£4.84).
Meanwhile, ad revenue came in at just over $41bn (£30.85bn), bolstered by a 10 per cent increase in average price per ad, and a five per cent rise in impressions.
The magnificent seven member revealed its daily active users across its ‘family of apps’ also rose six per cent, to 3.43bn (2.58bn) globally.
Guidance for the June quarter was also robust, with the Instagram and Facebook owner projecting revenue between $42.5bn and $45.5bn (£31.98-£34.23bn) – slightly ahead of consensus estimates.
Analysts have said that the firm’s strong topline guidance shows resilience despite global headwinds.
“Meta’s shares are racing higher in after-hours trading after a strong set of results – and more importantly, a confident outlook”, said Matt Britzman, senior equity analyst at Hargreaves Lansdown, in a post-match analysis.
Aggressive AI spend
Chief executive Mark Zuckerberg made clear Meta’s AI ambitions are accelerating.
Capital expenditures for this year have now been raised accordingly, estimated to range between $64bn and $72bn, up by around $5bn previously.
The added spend reflects increased investments in data centers and infrastructure to support AI development, including Meta’s Llama large language models (LLMs) and its Meta AI assistant – which has nearly hit one billion monthly active users.
Zuckerberg said the tech behemoth is “well positioned to navigate macroeconomic uncertainty”, and pointed to ongoing progress with AI glasses and Meta AI.
Analysts note Meta is taking a long view. “Meta will resist directly monetising AI this year, focusing instead on building AI usage among its app users, advertisers and developers”, said Debra Aho Williamson, founder of Sonata Insights.
Trade and regulation risks loom
Yet, while Meta’s results beat expectations, analysts caution that Meta faces near term risks.
Chinese e-commerce platforms like Temu and Shein – large advertisers on Meta’s platforms – have begun pulling back ad spend, likely anticipating US tariff changes and the end of the de minimis exemption.
OES’s chief financial officer, Susan Li, acknowledged the dip in ad spending from these Asia-based exporters, dubbing the situation “fluid”.
Anticipating last night’s earnings, CFRA’s Angelo Zino expected guidance to reflect a broader range of outcomes.
“Second-half visibility is murky, and the tariff shift may only amplify uncertainty”, he said.
But some analysts predicted that Meta’s scale offers insulation.
“Meta is more resilient than peers”, said Baird’s Ted Mortonson, pointing to the company’s 3.4bn monthly users.
“The topline likely benefited from steady ad demand early in the quarter, before the 2nd April announcement of US tariffs added a new layer of uncertainty”, said Lale Akoner, global markets strategist at eToro.
“While Q1 is unlikely to show major tariff-related fallout, Q2 could tell a different story”.
Meanwhile, the European Commission’s pushback against Meta’s no-ads subscription model could pose a significant threat.
The company warned of a “materially worse user experience” and possible revenue hit as soon as Q3. “We hope to have more clarity by next quarter’s call”, said Li.
Execution amid uncertainty
Meta stock dipped six per cent year to date, but rose over five per cent after the earnings report.
Analysts say investor focus is shifting from short term profitability to Meta’s long term AI narrative – and how well the tech titan can execute while navigating various geopolitical headwinds.
“Meta’s stock has outperformed many of its Big Tech peers this year, which means expectations are high and investor patience may be thinner”, said Akoner.
“If Meta can show disciplined execution and reaffirm its AI strategy, the stock may continue to find support, even in a volatile environment”.