Meta set to report second-quarter earnings after the bell

Meta is slated to report second-quarter earnings on Wednesday after the close of regular trading.

Here’s what analysts polled by LSEG are expecting:

• Earnings per share: $4.73
• Revenue: $38.31 billion

Wall Street is expecting sales growth of 20% from $32 billion a year earlier, as Meta’s business continues to recover from a brutal 2022, when a difficult economy led advertisers to slash spending. Meta’s ad revenue is projected to show an increase of 19% to $37.6 billion, according to StreetAccount.

While the company’s core ad unit has been the primary driver of the stock, investors are increasingly focused on Meta’s hefty spending on artificial intelligence and the metaverse. Like other tech giants, Meta has been pouring money into data center infrastructure and computing resources needed to train AI models and run massive workloads.

CEO Mark Zuckerberg acknowledged last week that Meta and its peers may be overspending on their AI buildouts, but said they have little choice if they want to be positioned for future growth.

“The downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years,” Zuckerberg said on a podcast with Bloomberg’s Emily Chang, echoing similar comments from Alphabet CEO Sundar Pichai on his company’s earnings call last week.

In April, Meta said its 2024 capital expenditures would be in the range of $35 billion to $40 billion, which was higher than the company’s prior forecast of $30 billion to $37 billion.

Earlier this year, Zuckerberg said Meta’s computing infrastructure will include 350,000 Nvidia H100 graphics cards, the expensive computer chips used to train so-called large language models and related AI software, by the end of 2024. Additionally, Zuckerberg said at the time that Meta’s computing infrastructure would contain “almost 600k H100 equivalents of compute if you include other GPUs,” which equates to billions of dollars of spending.

Regarding Google’s AI investments, Pichai told analysts last week that “When we go through a curve like this, the risk of underinvesting is dramatically greater than the risk of overinvesting for us here.”

As part of Meta’s AI push, the company debuted last week the latest version of its Llama AI model, which consists of three different variants that developers can access and use for free, underscoring Meta’s efforts to ensure that its AI technology is on par with OpenAI and Google.

Heading into Meta’s report on Wednesday, the digital ad market has shown some signs of weakness. Alphabet reported lower-than-expected ad revenue out of YouTube last week, and on Tuesday, Pinterest issued disappointing third-quarter guidance, leading to a 15% plunge in the stock after hours.

Pinterest finance chief Julia Brau Donnelly told analysts on an earnings call that while the technology, autos and financial services sectors were “sources of strength” for the company’s ad business, growth in those areas “was partially offset by softness within specifically food and beverage advertisers, who are navigating broader headwinds within that category.”

Meta’s Reality Labs division, which houses its metaverse technologies, is still bleeding cash. Analysts expect the unit to record an operating loss of $4.55 billion, according to StreetAccount. That would bring its total losses since late 2020 to roughly $50 billion. Revenue in the unit is expected to show an increase of 34% from a year earlier to $371 million, mostly from Quest VR headsets and smart glasses.

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