Meta powers ahead: ads and AI fuel strong Q1 despite economic storms

Meta powers ahead: ads and AI fuel strong Q1 despite economic storms

Jacob Falkencrone

Global Head of Investment Strategy

Key points:

  • Meta’s advertising remains strong, delivering impressive growth despite global trade and economic uncertainties.
  • Huge AI investments offer exciting long-term opportunities, though costs are substantial and immediate returns uncertain.
  • Reality Labs and EU regulatory issues present near-term risks; investors should closely monitor developments here.

This content is marketing material.

In a climate marked by escalating trade tensions and global uncertainty, Meta's latest earnings arrive as a beacon of optimism. The tech giant, parent company of Facebook, Instagram, and WhatsApp, delivered robust first-quarter results, reaffirming its resilience and ambition to lead in artificial intelligence despite external pressures.

Strong performance, stronger signal

Meta's revenue surged 16% year-over-year, reaching USD 42.31 billion, clearly beating analyst expectations of USD 41.34 billion. Even more impressively, profits jumped 35%, hitting USD 16.64 billion, resulting in earnings per share (EPS) of USD 6.43—far surpassing market forecasts of USD 5.23.

Shares immediately responded positively, climbing more than 5% in after-hours trading as investors welcomed the reassurance provided by Meta's numbers.

CEO Mark Zuckerberg confidently told investors: “We're well-positioned to navigate the macroeconomic uncertainty.”

This isn’t merely reassurance—it’s a powerful statement that Meta believes its underlying business model can weather storms better than most.

Advertising defies tariff concerns

The resilience of Meta’s advertising business was particularly striking, given investor fears about the Trump administration’s tariff policy and potential disruptions to global economic activity. Instead, ad revenues grew strongly across all key regions, with North American markets up 18% year-over-year, while the average ad price soared by 10%, more than doubling market expectations.

For Meta, advertising isn't just holding steady—it's thriving. Think of it as Meta's sturdy foundation, allowing the company to confidently invest in its future even amid turbulent times.

Betting big on AI leadership

Perhaps the boldest narrative emerging from Meta’s earnings call was the company’s deepening commitment to artificial intelligence. Zuckerberg reiterated his ambition for Meta to become “the AI leader,” boosting annual capital spending guidance to between USD 64 billion and USD 72 billion—an increase intended primarily to build out infrastructure, such as expansive data centres to support Meta’s ambitious AI goal.

This isn't just spending for spending’s sake; Zuckerberg clearly outlined where Meta expects these investments to yield returns:

"Improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices. Even with significant investments, we don't need to succeed in all areas to achieve a strong ROI," he assured investor.

The scale of these investments is daunting—but Meta sees them as strategic necessities to maintain its competitive edge against AI heavyweights such as Alphabet’s Google, OpenAI, and Microsoft.

The persistent challenge of Reality Labs

However, it’s not all smooth sailing. Reality Labs, Meta’s ambitious but loss-making metaverse division, continues to weigh heavily on profits. This quarter, losses widened to USD 4.21 billion on minimal revenue of just USD 412 million. Investors are rightly asking when this division will move from a costly experiment to a profitable enterprise.

Regulatory storm clouds in Europe

Adding complexity to the horizon, Meta faces significant regulatory challenges in Europe under the Digital Markets Act. Management acknowledged the potential for these changes to materially impact the user experience and advertising effectiveness starting as early as Q3. While the company intends to appeal, this remains a significant risk factor investors should closely monitor.

Guidance reflects confidence amid caution

Looking ahead, Meta’s second-quarter revenue guidance of between USD 42.5 billion and USD 45.5 billion comfortably exceeds current analyst expectations. Importantly, management also slightly lowered their full-year expense outlook, highlighting a focus on cost discipline even amid massive strategic investments.

Zuckerberg summarized the dynamic succinctly, saying: “The pace of progress and the opportunities ahead of us in AI are staggering.” Meta clearly believes the rewards justify the risks.

Key takeaways:

  • Strong advertising core: Robust ad revenue and pricing show remarkable resilience amid global trade tensions.
  • Massive AI investments: Bold, strategic spending aims to cement Meta’s position at the forefront of AI innovation.
  • Reality Labs losses: Persistent financial drain needs careful investor attention—look for clear signs of improvement or strategic recalibration soon.
  • European regulatory risk: Watch closely as the regulatory landscape could impact short-term performance.

Investing in ambition

Meta’s impressive quarterly results serve as a powerful reminder of its unique ability to combine immediate financial resilience with ambitious long-term vision. Investors face an intriguing dilemma: Can Meta sustain such bold investments and manage risks effectively?

As Meta doubles down on its aspiration to be an AI leader, investors will soon discover whether this bold strategy is genuinely visionary—or overly ambitious. One thing is certain: Meta isn’t just responding to the future; it’s intent on shaping it.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992