Deutsche Bank released a research report forecasting Meta's second-quarter performance, believing that AI capital expenditure has become the focus, and investors need to pay attention to cost pressures.
According to news from the Wind Trading Desk, on July 21, Deutsche Bank's research report pointed out that based on a projected GAAP earnings per share of $30.22 in 2026 and a price-to-earnings ratio of 26 times, Deutsche Bank maintains a &#34;Buy&#34; rating on Meta, with a target price of $770:
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<li>It is expected that Meta's second-quarter revenue forecast has been raised to $45 billion, a year-on-year increase of about 15%.</li>
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<li>In terms of expenses, it is expected that Meta has shifted from potentially lowering its expense guidance this year to maintaining the current total expense guidance level of $113 billion to $118 billion, and may even increase in the second half of the year. Deutsche Bank expects that the increase in R&amp;D expenses can be offset by reducing general administrative expenses.</li>
<li>Regarding capital expenditure, the forecast for fiscal year 2025 remains at $69 billion (an increase of 85% year-on-year), close to the higher end of the guidance range. However, Deutsche Bank emphasizes that investors must be wary of the risk of uncontrolled costs.</li>
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The report pointed out that Meta is currently caught in an intense &#34;AI talent war,&#34; spending heavily and making large-scale investments, leading to high operating and capital expenditures. Therefore, while the revenue side may continue to bring surprises, do not expect Meta to enhance profits in the short term through cost-cutting. The company's future growth will entirely depend on whether AI investments can continue to translate into overwhelming revenue growth.
<h2>Advertising Revenue Exceeds Expectations: AI-Driven Growth, Impact from Chinese E-commerce is Controllable</h2>
Since the release of the first-quarter financial report, Meta's stock price has risen by 23%, outperforming the S&amp;P 500 index's 12% increase.
Deutsche Bank's advertising research shows that the growth rate of advertising revenue on Meta's platform in the second quarter increased by about 1 percentage point quarter-on-quarter, with a further acceleration trend expected in the third quarter. This sharply contrasts with Wall Street's expectation of a 3 percentage point year-on-year decline in advertising growth in the U.S. and Canada in the second quarter, and a further decline of 1.5 percentage points in the third quarter.
Deutsche Bank pointed out that the core driver of this strong performance is the application of AI technology— Meta's Advantage+ tool, while emphasizing that this will become a lasting source of growth for Meta, as it significantly improves advertisers' return on ad spend (ROAS).
Despite changes in U.S. tariff policies leading to a significant decline in advertising spending from Chinese e-commerce—Meta estimates this revenue stream to be about $18 billion—the overall industry spending remains strong. Additionally, since mid-May, with the easing of U.S. tariff regulations, some advertising revenue has begun to flow back.
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Deutsche Bank believes that Meta's &#34;deep auction dynamics&#34; in its advertising bidding system are largely filling the gap left by the loss of major clients, with some budgets being reallocated to regions such as Europe and Latin America.
<h2>User Engagement Rebounds: AI Recommendation Engine Shows Significant Results</h2>
In addition to its advertising business, Deutsche Bank believes that user activity in Meta's core applications has also seen positive improvements with the support of AI, which will provide support for more sustainable growth in advertising impressions in the future.
Research data shows that in the second quarter of 2025:
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<li>Facebook: Global conversation count year-on-year growth is -5%, better than the -7% in the first quarter; total user duration year-on-year growth is -3%, better than the -6% in the first quarter.</li>
<li>Instagram: Global conversation count year-on-year growth is 4%, significantly better than the flat growth in the first quarter; total user duration year-on-year growth is 11%, significantly higher than the 6% in the first quarter.</li>
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<li>Threads: User duration increased by 13% quarter-on-quarter in the second quarter, maintaining a healthy growth trend.</li>
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In addition, the newly launched Meta AI standalone application has seen over 11 million downloads globally since its release at the end of April, indicating good early user acceptance.
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<h2>Costs and Capital Expenditures: The AI Talent War Becomes a New Market Focus</h2>
Deutsche Bank points out that although Meta's revenue trends are positive, market sentiment has shifted its focus to the expense side.
Meta's aggressive expansion in the AI field has brought significant cost pressures. The report clearly identifies two core events:
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<li>AI Talent Competition: Market reports indicate that Meta is offering bonuses of up to $100 million for top AI engineers.</li>
<li>Strategic Investment: Meta announced a $14 billion investment to acquire a 49% stake in Scale AI, with its founder Alex Wang also joining Meta.</li>
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These actions have changed market expectations regarding Meta's expense guidance. What was previously expected as a &#34;downward adjustment of expense guidance&#34; has shifted to &#34;maintaining current levels or even possibly increasing.&#34; Deutsche Bank expects that Meta's total expense guidance for fiscal year 2025 will remain between $113 billion and $118 billion.
Capital expenditures (Capex) are also under pressure. The Capex guidance of $64 billion to $72 billion for fiscal year 2025 includes expectations for hardware cost inflation
Deutsche Bank believes that even if the tariff impact is lower than expected, the saved funds are very likely to be reinvested to accelerate the construction of data centers, rather than being returned to investors

Meta Q2 earnings preview: Advertising revenue "exceeds expectations," AI tools take effect, capital expenditures continue to surge next year?