Meta earnings are coming. Here's what to watch

When Meta (META+0.78%) reports its 2025 first-quarter earnings after the market closes Wednesday, Wall Street will watch closely for signals on advertising resilience, genAI monetization, and fiscal discipline amid geopolitical headwinds, antitrust lawsuits, and general economic uncertainty.

Consensus estimates peg Meta’s first-quarter 2025 earnings per share (EPS) at $5.21, which would deliver a 11% increase from $4.71 a year ago. Revenue is projected to rise 13% to $41.2 billion, driven by stronger ad monetization, diversified revenue streams, and an expanding global user base.

But recent estimate revisions suggest caution.

Over the past month, consensus EPS expectations have declined from $5.33 to $5.21, and annual EPS estimates for 2025 have been trimmed by at least a dozen analysts covering the stock. Still, Meta has exceeded EPS forecasts in each of the last four quarters, and analysts expect a positive first-quarter earnings report from the social media giant.

Key areas to watch

One of the biggest areas to watch will be in Meta’s reported advertising revenue. Following Google’s (GOOGL-0.36%) stronger-than-expected advertising-revenue results, all eyes are on Meta’s.

Jefferies (JEF-1.02%) noted that over 10% of Meta’s ad revenue comes from China-based advertisers, who have reportedly pulled back on their ad spending due to rising U.S.-China trade tensions. (U.S. tariffs on Chinese goods are currently at 145%.) Tariffs will likely surface in Meta’s commentary; Google execs flagged a “slight headwind” in this area, and Meta’s earnings report and call might offer further commentary on how trade dynamics are affecting global ad spend.

As Meta pushes forward with its long-term vision of the metaverse and AI, two areas that remain top of mind for investors are the cash-hemorrhaging Reality Labs division and the firm’s expansive genAI initiatives.

The Reality Labs unit — which is home to the company’s virtual and augmented reality hardware, software, and metaverse platforms — continues to be a financial drag. Last year, Reality Labs posted operating losses of approximately $20 billion while generating only about $2 billion in revenue. Jefferies analysts see leverage potential here, suggesting Meta could realign (and trim) Reality Labs spending to better match macroeconomic uncertainty.

Morningstar (MORN+0.37%) assigned the company a “high” uncertainty rating — and said Meta’s “unprofitable” investments in genAI and Reality Labs “add a layer of uncertainty around its business, even as its large and stable advertising business continues to generate substantial cash flows in our forecast.” A downward revision or commitment by the company to spend more efficiently (or just less) in this segment could be viewed positively by Wall Street.

Meanwhile, Meta’s generative AI push — anchored by its open-source Llama family of large-language models — represents a promising yet not fully monetized frontier. The coming inaugural LlamaCon event (which takes place one day before earnings) is expected to showcase how Meta is building a platform around open-source AI to rival offerings from competitors such as OpenAI and Google.

While Meta says it’s made progress in embedding AI across its apps — to support content recommendations, moderation, and ad targeting — the company’s focus will need to be on direct monetization. Investors will be listening for updates on AI-powered ad formats and tools for marketers, Llama’s business applications, potential partnerships or licensing models, and any AI infrastructure revenue.

Progress on any of these fronts could help offset investor concerns about the efforts’ high costs. Morningstar said it expects genAI monetization to be a “key valuation driver” and noted that clear progress on AI monetization could further propel the stock, which currently trades near a market multiple.

Meta’s capital expenditures are expected to remain in the $60-65 billion estimate for 2025 — with that spending decreasing in 2026 if the economy continues to struggle. Investors will want assurances that the company’s spending remains flexible this year.

Antitrust challenges loom large

Meta’s mounting antitrust challenges continue to cast a shadow over the company’s dealings. The company was back in federal court last week as part of a monopoly case that could see a potential spin-off of Instagram and WhatsApp. The Federal Trade Commission’s alleged that the company has maintained an illegal stranglehold on a subset of the social networking market by acquiring emerging rivals.

Morningstar said that the government’s case against Meta is “materially weaker” than the ones Google is facing but acknowledged that regulatory scrutiny is a real factor when evaluating Meta’s long-term risk profile.

From an earnings standpoint, the direct impact of the court case over this quarter is expected to be minimal. Meta isn’t expected to comment on the litigation during the earnings call, in line with the company’s typical practice. While the antitrust case won’t materially affect first-quarter earnings, it could constrain Meta’s strategic flexibility over time, especially regarding acquisitions or further vertical integration.

What’s next for Meta?

The Silicon Valley giant’s shares closed Friday at $547.27, down about 5% over the past month. (Meanwhile, Amazon (AMZN-1.11%) fell 2% over that period and Google rose 5%.) In Meta, Morningstar sees significant upside, implying a 30% premium to current levels. Meanwhile, Wedbush and Jefferies maintain bullish ratings, citing Meta’s ad platform and improving AI strategy. Jeffries said that the second quarter will be a wall of worry, “but Meta is our best climber.”

Despite this bullishness from some corners of Wall Street, other analysts have said caution will be key. Needham’s Laura Martin recently reiterated her “underperform” rating, warning of downward revisions to full-year earnings, margins, and cash flow, as well as rising capital expenditures and Reality Labs losses.

Morningstar echoed the caution but said the company’s “wide economic moat” will mean that Meta’s sales will grow at a 12% compound annual growth rate for the next five years, “spearheaded primarily by an increase in average revenue per user, with user growth also chipping in.”

Its analysts continued, “Drilling deeper, we believe Meta has a strong monetization opportunity ahead of it in Asia and the rest of the world. While we expect advertising sales from North America and Europe to grow steadily, we believe increasingly affluent and growing middle classes in Asia, Africa, and the Middle East will allow Meta to improve its ad monetization in those regions, lifting its overall top line.”

CEO Mark Zuckerberg and chief financial officer Susan Li are scheduled to discuss Meta’s earnings results during a 5:00 p.m. ET call. Given the digital ad environment and tempered expectations, investors are bracing for a potentially volatile post-earnings move — some investors suggest there could be an 8.3% swing in either direction.

Whether Meta surprises to the upside or disappoints with cautious guidance, the company’s report will help set the tone for how tech giants are navigating a complicated mix of innovation, investment, and geopolitical risk.