Should Meta Platforms Stock Be in Your Portfolio Pre-Q2 Earnings?

Meta Platforms META is set to report its second-quarter 2025 results on July 30.META expects total revenues between $42.5 billion and $45.5 billion for the second quarter of 2025. The Zacks Consensus Estimate for second-quarter revenues is pegged at $44.84 billion, indicating an increase of 14.77% from the year-ago quarter’s reported figure. The consensus mark for earnings stands at $5.83 per share, up 1.7% over the past 30 days, suggesting growth of 12.98% from the figure reported in the year-ago quarter.Meta Platforms’ earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 17.3%.  Meta Platforms, Inc. Price and EPS Surprise Meta Platforms, Inc. price-eps-surprise | Meta Platforms, Inc. Quote Let’s see how things have shaped up for the upcoming announcement.Strong Advertising to Aid META’s Q2 ResultsMETA is riding on strong advertising revenue growth prospects. Meta Platforms’ advertising revenues are expected to benefit from strong spending by advertisers as they leverage its growing AI prowess despite tariff-related uncertainties. The Zacks Consensus Estimate for second-quarter 2025 advertising revenues is currently pegged at $43.94 billion, suggesting 14.6% year-over-year growth. Meta Platforms’ offerings — WhatsApp, Instagram, Messenger and Facebook — currently reach more than three billion people daily. Their staggering reach and increasing ad impressions (up 5% year over year in the first quarter of 2025) make META one of the most important players in the digital ad sales market, apart from Alphabet GOOGL and Amazon AMZN. According to EMARKETER, global ad spending is expected to exceed $1 trillion, with 75% going to digital. In terms of ad revenues, Alphabet is estimated to hit $209.15 billion while Amazon $69.30 billion in 2025. Meta Platforms is expected to hit $183.8 billion.META has been leveraging AI and machine learning to boost the potency of its social-media offerings, including WhatsApp, Instagram, Facebook and Threads. Effective usage of AI has been helping the company keep its users engaged. AI-driven feed recommendations have been a key catalyst. However, rising expenses related to investments in developing more advanced models and AI services are expected to keep margins under pressure. The Zacks Consensus Estimate for Family of Apps’ operating income is pegged at $22.38 billion, indicating 15.7% year-over-year growth.The Reality Labs business continues to burn cash, which doesn’t bode well for META’s second-quarter results. The consensus mark for Reality Labs’ loss is pegged at $5.35 billion, wider than the year-ago quarter’s loss of $4.49 billion.META Shares Outperform Sector, IndustryMETA shares have jumped 22.3% year to date, outperforming the Zacks Computer & Technology sector’s appreciation of 10.1% and the Zacks Internet Software Industry’s return of 17.9%.Meta Platforms shares have also outperformed most of its “Magnificent 7” peers, including Apple, Alphabet, Amazon, Microsoft, and Tesla, over the same timeframe. NVIDIA NVDA is the only stock outperforming META year to date.While Apple and Tesla shares dropped 14.7% and 24.4%, respectively, Microsoft, Amazon, and Alphabet shares have returned 21.2%, 5.8%, and 1.5%, respectively, on a year-to-date basis. NVIDIA shares jumped 29.2%.META Stock's Performance Image Source: Zacks Investment Research Meta Platforms’ stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Sales, META is trading at 8.96X, higher than the broader sector’s 6.7X.Price/Sales (F12M) Image Source: Zacks Investment Research META Leverages AI to Boost GrowthAI is heavily dependent on data, of which META has a trove, driven by its more than 3.43 billion daily users. Meta Platforms has been leveraging AI to improve the potency of its platform offerings, including WhatsApp, Instagram, Messenger and Facebook. Meta AI usage continues to increase, with roughly one billion monthly users globally. The company’s initiative to add updates that will help Meta AI deliver more personalized and relevant responses is expected to boost engagement.META’s growing footprint among young adults, driven by improving recommendations, boosts its competitive prowess. AI usage is making it a popular name among advertisers. Meta Platforms focuses on improving advertisers’ return on ad spending. Andromeda, its proprietary machine learning system, improves the performance of the company’s advertising system by delivering more personalized advertisements to viewers. The deployment of META’s deep neural network on the NVIDIA Grace Hopper Superchip has been a key catalyst.In June, Meta Platforms introduced channel subscriptions, promoted channels and ads in WhatsApp’s Status tab in Updates, which is currently used by 1.5 billion people per day globally. This is expected to further attract advertisers. Ads Manager’s latest features that enable businesses to manage their marketing strategy across WhatsApp, Facebook and Instagram are noteworthy. Businesses can now upload their subscriber list and either manually select marketing messages as an additional placement or use Advantage+. META’s AI system will then optimize budgets across placements to maximize performance. Ads Manager will help businesses in creating ads in Status once the feature is available.Meta Platforms is planning to introduce Business AI that can make personalized product recommendations and facilitate sales on any business’ website. Over a WhatsApp chat, the Business AI can also follow up with customers to answer questions and provide updates. Moreover, Meta Platforms plans to launch calling and voice options for large businesses that use the WhatsApp Business Platform, thereby strengthening the relationship between businesses and customers.ConclusionMETA’s use of AI bodes well for its prospects and justifies a premium valuation. Meta Platforms currently has a Zacks Rank #2 (Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. 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(META): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks