Meta's Q2 Earnings: Key Areas Investors Must Pay Attention To

Core Viewpoint - Meta Platforms is preparing for its Q2 earnings report, with significant upgrades from Wall Street analysts and a focus on its advertising business and AI strategy [1][2][3] Group 1: Earnings Expectations - The consensus price target for Meta is around $752, indicating approximately 5% upside, while the average price target among analysts is nearly $782, suggesting over 9% upside [2] - Investors are particularly focused on the strength of Meta's advertising business, which is crucial for driving sales and adjusted earnings per share (EPS) [3] - Meta's forward price-to-earnings (P/E) ratio is 28x, just below its three-year high of 29x, indicating that substantial earnings beats may be necessary for share price increases [3] Group 2: Advertising Metrics - Growth in ad impressions delivered is a key metric, with a decline from 10% in Q2 2024 to 5% in Q1 2025; maintaining this 5% growth is essential for user engagement [4] - The price paid per ad growth should ideally remain in the 10% range, indicating increased competition among advertisers and the effectiveness of Meta's AI investments [5][6] Group 3: External Factors - The impact of tariffs on Meta's advertising business is a concern, with reciprocal tariffs set to take effect on August 1; insights into this could reveal the business's resilience [7] - Progress in Meta's Reality Labs segment is also critical, as sales fell 6% last quarter, and the company aims to significantly increase smart glasses sales in 2025 [8] Group 4: AI Strategy - Analysts are closely monitoring Meta's AI strategy, particularly the establishment of Meta Superintelligence Labs (MSL) and the recruitment of top AI talent, which is a significant investment [9][10] - The company aims to balance short-term AI monetization opportunities, such as advertising automation, with long-term goals in developing general artificial intelligence [11] - Commentary on potential shifts away from open-source AI models will be important for understanding Meta's future direction [12]