Meta's Q1 financial report exceeds expectations with dual growth in advertising and AI business

According to Zhitong Finance APP, after the market closed on Wednesday, Meta (META.US) announced its financial report for the first quarter of fiscal year 2025, with revenue and earnings per share significantly exceeding market expectations. The guidance for the second quarter also aligns closely with Wall Street expectations. As a result, Meta's stock price rose over 5% in after-hours trading. Meta's earnings per share for the first quarter were $6.43, far exceeding the market expectation of $5.28; revenue was $42.31 billion, also higher than the market estimate of $41.4 billion. Net profit grew by 35% year-on-year to $16.64 billion, compared to $12.37 billion in the same period last year, with overall revenue achieving a 16% year-on-year growth. The company also stated that it expects second-quarter revenue to be between $42.5 billion and $45.5 billion, close to the market consensus of $44.03 billion. Meta CEO Mark Zuckerberg mentioned during the earnings call that the company's business performance is currently strong, and they are confident in navigating macroeconomic uncertainties. In terms of cost control, Meta has lowered its total expenditure forecast for fiscal year 2025 from the previous range of $114 billion to $119 billion, adjusting it to $113 billion to $118 billion. Meanwhile, the company raised its capital expenditure budget from the previous range of $60 billion to $65 billion to $64 billion to $72 billion, citing plans to further increase investment in AI data centers and anticipating a rise in infrastructure hardware costs. The earnings report indicated that this adjustment reflects Meta's ongoing investment in AI infrastructure. In terms of specific business performance, Meta's advertising revenue for the first quarter was $41.39 billion, exceeding Wall Street's expectation of $40.44 billion. The Reality Labs division, focused on the metaverse and virtual reality, recorded an operating loss of $4.2 billion this quarter, slightly better than the analyst expectation of $4.6 billion. Reality Labs' revenue was $412 million, a year-on-year decrease of 6%, failing to meet the market estimate of $493 million. Regarding user growth, Meta reported that daily active users reached 3.43 billion in the first quarter, surpassing the market expectation of 3.39 billion and up from 3.35 billion in the previous quarter. The text-based social platform Threads performed well, with monthly active users growing from 320 million in January to 350 million. Zuckerberg stated that Threads ads are now open to all eligible advertisers globally, but CFO Susan Li noted that the company does not expect Threads ads to have a substantial impact on revenue in 2025. In the field of artificial intelligence, Meta's AI assistant "Meta AI" has seen rapid user growth, with monthly active users nearing 1 billion, up from 700 million in January this year. The company released a standalone Meta AI application this week and confirmed previous market rumors. Zuckerberg mentioned that the company plans to launch ads and paid versions on the Meta AI platform in the future, but will focus on refining product features before that Despite overall performance exceeding expectations, Meta also faces certain adverse factors. The company noted that the European Commission recently decided that its "ad-free subscription service" does not comply with a local regulation, which could have a "significant impact" on Meta's user experience and revenue in Europe starting in the third quarter of this year. Additionally, the company's advertising revenue in the Asia-Pacific region was USD 8.22 billion, slightly below analysts' expectations of USD 8.42 billion, reflecting regional growth pressures. As of March 31, Meta had a total of 76,834 employees, an 11% year-on-year increase. The company laid off the bottom 5% of employees in February as part of optimizing its human resources structure. It is worth noting that other tech giants reliant on advertising revenue have recently expressed concerns about the macroeconomic environment. Snap (SNAP.US) reported in its first-quarter earnings that it could not provide forward-looking performance guidance, leading to a sharp drop in its stock price; while Google (GOOG.US, GOOGL.US) pointed out last week that the Asian market may put pressure on its advertising business, and it is still unable to make a clear judgment for the second quarter