Earnings Report Preview | Meta faces ongoing challenges, but Wall Street still expects an "excellent report card"

According to Zhitong Finance APP, Meta (META.US) will announce its first-quarter earnings after the U.S. stock market closes on Wednesday. Despite uncertainties regarding tariffs and legal disputes, analysts remain optimistic about the company. As the parent company of Facebook, Instagram, and WhatsApp, Meta is expected to report earnings per share of $5.24 and revenue of $41.35 billion, representing year-on-year growth of 11% and 13%, respectively.

Legal and regulatory disputes have plagued Meta, and this week the European Union imposed a fine of €200 million ($227.5 million) on the tech giant for violating the Digital Markets Act. Meta stated that it plans to appeal the fine. Similarly, this month, Meta's antitrust trial began. The U.S. Federal Trade Commission (FTC) is seeking to force the company to sell or spin off Instagram or WhatsApp, claiming that Meta has engaged in "illegal acquisitions or burial plans to maintain its dominance" by acquiring "innovative competitors."

Before the earnings announcement, the company's stock price has soared to an all-time high, and revenue expectations are more than 15% higher than the previous quarter, with earnings per share (EPS) expectations also significantly raised. Meta has exceeded expectations for four consecutive quarters, and the market seems to anticipate another strong report.

Capital expenditure has also become a focus for investors. Meta CEO Mark Zuckerberg is fully investing in the artificial intelligence transformation sweeping the tech industry. Just last week, he stated that Meta plans to invest $60 billion to $65 billion in AI projects, including but not limited to building a large data center in Manhattan. In a previous earnings call, Meta CFO Susan Li expressed confidence in future performance: "We expect our capital expenditures for the full year 2024 to be between $38 billion and $40 billion, up from the previous range of $37 billion to $40 billion. We still expect significant growth in capital expenditures for 2025."

Morgan Stanley analysts recently wrote that Meta may be harmed by reduced advertising from Chinese companies due to tariffs, but they stated that Meta should be better positioned to withstand this impact compared to Alphabet (GOOGL.US) or Amazon (AMZN.US).

Among the 27 analysts tracked by Visible Alpha, 25 rated Meta as "buy," while only two rated it as "hold." The average target price given by analysts for the stock is close to $695, representing a premium of about 27% over last Friday's closing price of approximately $547