Meta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2

Core Insights - Meta Platforms reported strong earnings for the quarter ending April 30, with a revenue increase of 16% to $42.3 billion, exceeding Wall Street expectations by approximately $1 billion [2][3] - Adjusted earnings per share (EPS) reached $6.43, which was around $1.20 higher than anticipated [2] - The company provided a revenue guidance for Q2 at a midpoint of $44 billion, indicating a growth of 13%, also surpassing estimates by about $200 million [3] Financial Performance - Meta's operating margin improved by 360 basis points year-over-year to over 41% [4] - The price paid for ads grew by 10%, maintaining this growth rate for four consecutive quarters [4] - Daily active users (DAP) across Meta's apps increased by 6%, an improvement from the 5% growth in the previous two quarters [3] Capital Expenditure and AI Strategy - Meta raised its 2025 capital expenditure (CapEx) guidance by nearly 9% to $68 billion, primarily focusing on AI infrastructure [5] - The company reported a 7% increase in time spent on Facebook, a 6% increase on Instagram, and a 30% increase on Threads, attributed to AI-driven recommendations [6] - Despite the increased CapEx, there are concerns about the potential lower return on investment due to higher costs associated with AI infrastructure [7] Impact of Tariffs - Tariffs are affecting Meta's business, particularly in terms of increased costs and lower ad spending from Asian e-commerce companies due to regulatory changes [8][9] - The company noted that while tariffs have an impact, it is not significant at this point, and spending is being redirected to other markets [9][10] - The full effects of tariffs, especially the 145% tariffs on China, are expected to be reflected in Q2 earnings [11] Analyst Ratings and Stock Forecast - Meta's stock has a 12-month price forecast of $696.45, indicating a potential upside of 21.71% [10] - Following the earnings report, 19 analysts increased their price targets for Meta [11] - Despite a Moderate Buy rating, some top analysts suggest other stocks may be better investment opportunities at this time [13]