Magnificent Seven stock Meta Platforms' (NASDAQ: META) Q2 earnings report is quickly approaching, and, as always, it is a highly anticipated event. That sentiment may ring true now more than ever, as Meta has made aggressive moves over the last several months to alter its AI strategy.
Notably, Meta shares are getting upgraded significantly by Wall Street analysts coming into the release. As of the July 24 close, the MarketBeat consensus price target on Meta is around $752, implying only around 5% upside.
However, among Wall Street updates released in July, the average price target is nearly $782. This implies over 9% upside and raises the stakes for Meta in Q2. Below, we’ll detail some of the top items investors should pay attention to in Meta’s Q2 results, which the company will release on July 30.
Continued Advertising Strength Is Vital
The company’s core business remains the most critical focus for Meta: advertising. Thus, investors will surely want to see strength in this part of the business to drive sales and adjusted earnings per share (EPS) that meet or exceed analyst expectations. Meta trades at a forward price-to-earnings (P/E) multiple of 28x, just below its high over the past three years of 29x. It may take fairly substantial beats for shares to ride higher.
Other underlying metrics will help gauge Meta’s advertising business's health. One is growth in ad impressions delivered, which shows how many more ads Meta users saw. This growth rate ticked down from 10% in Q2 2024 to 5% in Q1 2025.
It would be nice to see Meta hold the line at 5% growth due to this recent decline. This would indicate that user engagement gains are not trailing off, which is key for increasing the value of Meta’s ad surfaces.
Investors will want to see Meta’s price paid per ad growth stay in the 10% range, plus or minus a couple of percentage points. This will indicate that competition among advertisers continues to increase, thus raising the prices paid to Meta.
It would also show that Meta's returns from its AI investments in advertising are not diminishing. Given that these metrics have been significant drivers of Meta’s rally, continued strength is important to the rally's continuation.
Addressing Key Pain Points: Tariffs & Reality Labs
It will also be important to see what kind of tariff-related impacts Meta sees on its advertising business going forward. In Q1, the impacts were relatively subdued. However, Trump’s tariff policy is slowly becoming more concrete, with reciprocal tariffs set to take effect on Aug. 1. The 145% reciprocal tariffs on China only lasted for around a month, but they could have resulted in a temporary negative impact on Meta’s business in Q2. Details on that impact could provide insight into how tariff-resistant Meta’s business really is.
Seeing some kind of progress in Meta’s Reality Labs segment will also be important. Last quarter, sales fell 6%. Meta wants to sell millions more of its smart glasses in 2025 than it did in 2024. Seeing Reality Labs return to growth this quarter will be key to the firm actually achieving this.
AI in Focus as Meta Undergoes Spending Spree
Lastly, analysts will likely focus a lot of their attention on Meta’s AI strategy, which the company is augmenting through the creation of Meta Superintelligence Labs (MSL). The company is doling out massive salaries to hire the best people in AI at MSL.
Alexandr Wang, whom Meta essentially spent $14.3 billion on to join the firm, is the clearest example of this. Understanding Meta’s AI vision, with Wang leading the charge, is key to the outlook on the firm.
Investors should look for Meta to strike a strong balance between near- to mid-term AI monetization and long-term AI leadership. The company wants to make money with AI today, with opportunities like advertising automation and WhatsApp business messaging at the forefront. However, it also needs to stay competitive in developing general artificial intelligence in the long term.
Commentary on how the company is shifting its approach, including the possibility of moving away from open-source AI models, will be key to watch.
Overall, the points detailed above provide a largely comprehensive view of what to watch for regarding Meta in Q2. We’ll circle back after the results to understand how well Meta on these fronts and cover other key details the company focused on in its earnings call.
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The article "Meta's Q2 Earnings: Key Areas Investors Must Pay Attention To" first appeared on MarketBeat.
