Meta Platforms Stock Rises After Stellar Q2 Earnings Beat

Meta Platforms (NYSE: META) stock is trading higher in US premarket price action today after the company reported better-than-expected earnings for the second quarter. Here are the key takeaways from the report.

Meta Platforms reported revenues of $39.07 billion in the June quarter which was 22% higher YoY and comfortably ahead of the $38.31 billion that analysts were expecting. The company’s expenses meanwhile rose only 7% YoY in the quarter which helped fuel a 73% rise in its net income.

Meta Platforms Reported Better-Than-Expected Q2 Earnings

Meta Platforms reported an EPS of $5.16 which was topped the $4.73 that analysts were expecting. Mark Zuckerberg was quite upbeat on the performance and said, “We estimate that there are now more than 3.2 billion people using at least 1 of our apps each day.”

He added, “The growth we’re seeing here in the U.S. has especially been a bright spot. WhatsApp now serves more than 100 million monthly actives in the U.S., and we’re seeing good year-over-year growth across Facebook, Instagram, and Threads as well, both in the U.S. and globally.”

Other Key Metrics from the Q2 Report

Looking at some of the other metrics, ad impressions across Meta’s family of apps rose 10% YoY in the quarter with the average price per ad also rising by a similar quantum. The company had 70,799 employees at the end of June which is 1% lower than the corresponding period last year. Meta said that monthly active users for Threads have risen to 200 million.

It generated free cash flows of $10.9 billion in Q2 and ended the quarter with cash and cash equivalents of $58.08 billion. The company forecasted Q3 revenues between $38.5 billion-$41 billion which at the midpoint was higher than Street estimates. Notably, Meta spooked markets with tepid guidance in the previous quarter which sent its shares south despite the earnings beat for that quarter.

Meta Maintains 2024 Expense Guidance

Meta maintained the full-year expense guidance of $96 billion-$99 billion but raised the full-year capex guidance to $37 billion-$40 billion compared to the previous guidance of $35 billion to $40 billion.

The company has been investing in its artificial intelligence (AI) and metaverse business which is leading to higher capex. The company’s Reality Labs which is building the metaverse posted an operating loss of almost $4.8 billion in the quarter which is higher than the $3.4 billion loss in the previous quarter. It expects the segment’s 2024 losses to be “meaningfully higher” this year.

In her prepared remarks, Meta’s CFO Susan Li said, “We expect infrastructure costs will be a significant driver of expense growth next year as we recognize depreciation and operating costs associated with our expanded infrastructure footprint.”

She added, “we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.”

Notably, during the previous earnings call also, Zuckerberg had stressed that AI investments would be a multi-year theme for the company.

Zuckerberg Sees AI as a Massive Opportunity

Zuckerberg sees AI as a massive opportunity. During the earnings call, he said that while currently, advertisers approach the company with the kind of audience they want to target, now Meta’s ad systems are in a position to better predict which users would be interested than the advertisers could themselves.

He added, “in the coming years, AI will be able to generate creative for advertisers as well, and we’ll also be able to personalize it as people see it. Over the long term, advertisers will basically just be able to tell us a business objective and a budget, and we’re going to go do the rest for them.”

Zuckerberg defended the company releasing its AI model on open source and talked about much higher computing power to train the next Llama 4 model. “The amount of computing needed to train Llama 4 will likely be almost 10 times more than what we used to train Llama 3, and future models will continue to grow beyond that,” said Zuckerberg during the earnings call.

India Becomes Largest Market for Meta AI

Zuckerberg said that India has become the largest market for Meta AI usage. The country has over 500 million WhatsApp users which makes it the biggest market for the popular messaging app. He believes that if the app can become as popular in the US as it is overseas it would be a “big tailwind.”

How Analysts Reacted to Meta’s Q2 Earnings?

Wall Street analysts reacted positively to Meta’s Q2 earnings beat. CFRA analyst Angelo Zino reiterated a buy rating on Meta and said in the note, “Overall, we view the results as solid and believe Meta continues to be a share taker in the broader digital ad market, partly reflecting its more aggressive AI tactics to improve content/ad tools.”

According to Debra Aho Williamson, founder and chief analyst of Sonata Insights, “Meta stands out from other tech firms that have AI ambitions because it already brings in a massive amount of revenue from digital advertising.”

Williamson added, “It’s not trying to build a new business from scratch. And unlike Google, which is grappling with making changes that will impact its core ad business, most of Meta’s AI investments are either aimed at making advertising on its properties work better, or at building new features that could eventually become revenue drivers.”

Meanwhile, Meta stock is up 7% in pre-market today as it looks set to become the first “Magnificent 7” stock to close with gains following the earnings report for the June quarter. Markets next look forward to quarterly reports from Apple and Amazon both of which are set to report after the close of markets today.