Meta (META) will report its Q2 2023 earnings on Wednesday after the bell.
Investors will be watching for the Facebook parent’s advertising growth, along with updates on artificial intelligence (AI), Instagram Reels, newly-launched Twitter competitor Threads, and the company’s VR operation, Reality Labs.
Here’s what Wall Street’s expecting to see out of Meta, as compiled by Bloomberg:
Revenue: $31.06 billion estimated
EPS: $2.92 estimated
Advertising Revenue: $30.43 billion estimated
Family of Apps Revenue: $30.55 billion estimated
Reality Labs Operating Losses: $3.68 billion estimated
Facebook Daily Active Users: 2.03 billion estimated
Operating Margin: 30.4% estimated
In Q1, Meta guided to Q2 revenue coming in between $29.5 billion and $32 billion.
Overall, there’s a solid level of optimism about Meta this earnings cycle, wrote JMP Securities Analyst Andrew Boone, who on July 17 raised his price target on the company to $350 from $300.
“We believe Meta is in the early stages of benefiting from multiple product catalysts, including Reels, AI, and cost discipline,” Boone wrote. “Specifically, Reels and improved recommendation algorithms are driving greater user engagement, and with models still improving, we expect Facebook and Instagram to continue to take share of user time…. With comps easing over the next several quarters while 1Q23 cost measures are a tailwind to profitability, we think our increased estimates remain conservative as we continue to believe shares can move higher.”
The state of digital ads, as always, will be key to Meta’s earnings. On this point, there’s a tie-in with AI, according to Boone.
“We will be listening for how Meta is incorporating generative AI to automate creative and improve [return on ad spend],” wrote JMP’s Boone. “CEO Mark Zuckerberg recently said on a podcast that he wants advertisers to simply give Meta a budget and objective, and the company will take care of the rest; we expect generative AI to be key in automating more steps of campaign creation.”
On Tuesday after the bell, Alphabet (GOOG, GOOGL) will also report its Q2 earnings, providing early visibility into the digital ad market.
Threads, Reels, and VR
Meta’s had an eventful 2023 so far, gaining ground on monetizing both Instagram Reels and messaging on WhatsApp and launching Twitter competitor Threads (which quickly became the fast-growing consumer app ever).
“It remains early here as Threads was launched with [about] 50 engineers and a handful of product managers and designers in just five months and it is more of a minimally viable product today than a full-fledged platform,” wrote Boone. “In our view, its evolution will be key to sustaining engagement as we believe Meta looks to build a significant audience before turning on monetization.”
In the social media giant’s earnings call, investors will be keeping an eye out for updates on Meta’s VR division, Reality Labs, which in 2022 lost more than $13 billion. The company’s newest headset, the Meta Quest 3, will be coming out in fall, just as the VR race is getting hotter, with Apple (AAPL) entering the space with its mixed reality headset, the Apple Vision Pro, later this year.
Meta shares are up about 134% year-to-date.
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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