After weeks of headlines about Meta Platforms' eye-popping AI spending plans, the Facebook parent company is set to report second-quarter earnings this afternoon, putting Meta stock's rally to the test.
Shares of the Mark Zuckerberg-led tech giant have gained 31% since Meta reported its Q1 results in late April. The stock has been helped by easing tariffs concerns and the strong outlook that the company gave with its Q1 results. But the big story has been Zuckerberg's all-out AI offensive that started last month.
In just the past few weeks, Meta has lured top researchers away from AI rivals with reported pay packages above $100 million. Zuckerberg, meanwhile, has pledged to spend "hundreds of billions" on AI infrastructure, including to build a Manhattan-size data center. A $14.3 billion investment in Scale AI helped Meta land the startup's founder, Alexandr Wang, as leader of the new Meta Superintelligence Labs.
So far, investors have been willing to back Meta's costly AI push. Meta stock is ahead 19.8% overall this year — trailing only the 30% gain from Nvidia and 22% gain from Microsoft for best performance among the megacap Magnificent Seven stocks.
But Meta stock's rally has leveled off in recent weeks. Shares fell below Meta's 21-day moving average on Tuesday, continuing a pullback from a record-high 747.90 on June 30. On the stock market today, Meta was up a fraction in premarket trading at 705.64.
With its Q2 report, Meta will need to show that its core business is strong enough to absorb the costs of its longer-term AI bets. Here's what to watch:
Meta Stock: State Of The Advertising Market
Meta derives nearly all of its revenue from selling advertising that is displayed to the more than 3.4 billion users across Facebook, Instagram and the rest of its "Family of Apps."
The digital advertising market has been tested this year by tariffs. Levies on imported goods are a challenge for many of the industries that reliably purchase online ad space, such as e-commerce companies, packaged-goods firms and automakers.
But Wall Street's view of the digital ad market has turned more positive following the deal with China to lower tariffs in May.
Google parent company Alphabet reported stronger-than-expected advertising revenue with its Q2 results last week. Google is the only company with a larger overall digital ad business than Meta.
BofA Securities analyst Justin Post told clients Monday that Google's results offer a "positive read" for Meta.
Evercore ISI analyst Mark Mahaney told clients Sunday that industry check-ins showed "uncertain but still stable" advertising demand.
Meta is seeing results from its expanded AI tools, Mahaney added. He rates Meta stock as outperform.
"Our speakers called Meta the 'benchmark' for AI-driven advertising automation as Advantage+ Shopping campaigns and generative-creative tools are pulling disproportionate budget from SMBs and mid-market advertisers, enabling a 'set-and-forget' workflow in which marketers upload a product feed and budget while Meta optimizes targeting and creative in real time," Mahaney wrote.
Overall, analysts expect that Meta's digital advertising revenue will increase 14.8% to $44 billion, according to FactSet. Total revenue is seen rising 14.7% to $44.81 billion. Meta's earnings, meanwhile, are projected to rise 14% to $5.88 per share.
How Much Is AI Costing Meta?
The $68 billion question for Meta stock is whether the tech giant will once again raise its estimate for 2025 capital expenditures.
Meta already increased the midpoint of its capex guidance range from $62.5 billion to $68 billion when it reported first-quarter results in late April.
Since then, Meta has announced plans for Manhattan-size data centers and offered top AI researchers nine-figure pay packages.
"We don't expect Meta to pull back much on its capex initiatives given the importance of AI, especially after the recent hires it made and its CEO's recent posts stating that Meta is going to 'invest hundreds of billions of dollars into compute to build superintelligence,'" Jefferies analyst Brent Thill wrote to clients last week.
He is forecasting Meta's capex to reach $68.6 billion this year. The spending could pressure Meta's free cash flow, Thill noted. But tax savings from the recently approved "One Big, Beautiful Bill Act" could offset some of the rising costs, he added. Thill rates meta stock a buy.
Google last week raised its capex to $85 billion in 2025, up from earlier guidance of $75 billion.
Meta Stock Seen As Strong AI Bet
BofA's Post wrote Monday that he expect AI expenses will be the focus for Meta's call with analysts Wednesday. Investors want to hear more about Meta's AI monetization strategy.
But Post expects the strength of Meta's ad business can offset any questions about rising costs. He rates Meta stock a buy.
"Given audience scale, we continue to see Meta as one of the best AI opportunity stocks, with potential revenue upside as AI capabilities are integrated into the ad stack," Post wrote.
