Track Hyper | Meta's Q1 report exceeds expectations: AI technology turns red into blue

Author: Zhou Yuan / Wall Street News

On April 30th, Eastern Time, Meta's first-quarter financial report boosted global confidence in the commercial potential of AI technology.

The financial report showed that in the first quarter, Meta achieved revenue of $42.314 billion, a year-on-year increase of 16%, exceeding market expectations of $41.38 billion; it recorded a net profit of $16.644 billion, a year-on-year increase of 35%, with a gross margin of 81.2%.

This achievement alleviated Meta's growth anxiety since the beginning of 2023—after user growth peaked, Meta successfully achieved growth again in the economic cycle through AI technology iteration and e-commerce ecosystem expansion.

At the same time, Meta raised its capital expenditure expectations for 2025 to between $64 billion and $72 billion; it also expects that in the second quarter of 2025, Meta's revenue will be between $42.5 billion and $45.5 billion.

After the financial report was released, Meta's stock price rose by more than 7% during intraday trading, closing up 4.23% at $572.21.

Meta's performance structure is centered around social advertising, while also focusing on two strategic directions: AI technology and the metaverse.

E-commerce advertising was the core growth driver for the first quarter; the metaverse division Reality Labs (including AR and VR) continued to incur losses in the first quarter; the Meta AI application series Family of Apps (FoA), including Instagram, Facebook, and WhatsApp, achieved year-on-year growth.

The financial report showed that the e-commerce advertising business achieved revenue of $41.39 billion in the quarter, a year-on-year increase of 16.2%, accounting for 97.8% of total revenue.

By region, the strongest revenue growth was seen in other parts of the world and North America, with year-on-year increases of 19% and 18%, respectively, followed by Europe and the Asia-Pacific region.

In the first quarter, Meta's ad impressions grew by 5%, and the price per ad increased by 10%, driving ad revenue growth; among them, e-commerce advertising contributed over 40%+, becoming the largest vertical category.

Meta stated that the growth in ad impressions benefited from the Asia-Pacific region, while the increase in price per ad was due to rising demand from advertisers.

The most solid foundation for e-commerce advertising is the number of daily active users.

The financial report showed that in the first quarter, Meta had 3.43 billion daily active users, a year-on-year increase of 5.9%, exceeding market expectations of 3.39 billion.

The monthly active users of Meta's new social media platform Threads have reached 350 million, but Meta expects that Threads' ad revenue will not become a major factor driving ad impressions and revenue growth by 2025.

In contrast to the high growth of e-commerce advertising, Reality Labs continued to incur losses: revenue in the first quarter decreased by 6.4% year-on-year to $412 million, with an operating loss of $4.21 billion, a year-on-year increase of 9%.

The monthly active users of Ray-Ban Meta glasses are more than four times that of the same period last year, with sales increasing by 300% year-on-year. Currently, Meta has fully launched the real-time translation feature of Ray-Ban Meta in all markets, supporting English, French, Italian, and Spanish Meta CEO Mark Zuckerberg stated that the monthly active users of the smart assistant Meta AI are approaching 1 billion. Meta plans to turn Meta AI into a platform for displaying advertisements, and in the future, Meta may charge for the premium version of Meta AI, but will focus on product development for the next year before starting to generate profits.

How does Meta's e-commerce advertising drive such strong performance growth?

In fact, this is the result of Meta reconstructing the user experience with AI technology. Essentially, AI technology has indeed been implemented in the To B application layer, achieving value increment.

According to information from the company's earnings call, the newly transformed Reels ad recommendation model using AI technology has improved the conversion rate by 5%, and the generative ad recommendation architecture has increased ad efficiency by 200%, with advertisers using AI creative tools increasing by 30%.

Improving the recommendation system with AI technology has led to a 7% and 6% increase in usage time for Facebook and Instagram users (U.S. market); the introduction of Llama into the Thread recommendation system has increased user usage time by 4%.

Taking the U.S. company AppLovin as an example, according to its Q4 2024 financial report, AppLovin's AI advertising engine has increased the conversion rate to 4%-6%, while the traditional advertising conversion rate is 1%-3%, with ROI rising to more than 1.5 times the industry average.

According to a report from Gartner, it is predicted that by 2025, more than 50% of global advertising spending will be managed and optimized through AI technology.

AppLovin's AXON 2.0 advertising engine continuously optimizes advertising strategies through self-learning, significantly improving ad matching efficiency and accuracy. This technology allows advertisers to capture target customers in complex market environments, reduce ineffective exposure, and thus increase conversion rates.

Meta continues to increase the improvement of its advertising business through AI technology.

In 2025, Meta's capital expenditure is expected to be between $64 billion and $72 billion, exceeding previous expectations, mainly for data centers and AI computing power, with 70% allocated to advertising technology and the Reels ecosystem.

A report from Huashan Securities pointed out that AI technology has formed a transmission path for Meta's advertising business of "increased delivery efficiency → ROI growth → CPM rise," and it is expected that the company's advertising unit price will continue to rise by 8%-10% in 2025.

Meta's Q1 2025 financial report is a textbook case of "refined operation in the era of stock": when user growth peaks, through AI technology upgrades (such as the Andromeda system), ecological expansion (such as e-commerce integration), and regional deepening (such as localization in Southeast Asia), it successfully achieves "second curve" growth in performance.

Can similar domestic companies replicate this model?

AI technology is not just a slogan; based on Meta's Q1 report performance, AI technology can indeed inject new growth momentum into traditional (red ocean) industries, thereby cultivating the "value-added space" (blue ocean) with the highest commercial value content Meta has proven with solid performance that even in the most brutal competitive environment, substantial technological investment (AI recommendation algorithms, e-commerce tools) and precise market strategies (localized operations) can still create business value that exceeds expectations.

For the entire industry, the business value created by Meta's use of AI technology to reconstruct traditional industries is writing a valuable "breakthrough guide" for all internet companies facing growth bottlenecks