Meta Platforms Q1 Earnings Preview: Job Cuts, AI Shift, Metaverse And More

Zinger Key Points
  • Meta Platforms reports first quarter financial results after market close Wednesday.
  • Analysts see the company benefitting from the growth of AI initiatives.

Technology and social media giant Meta Platforms META is set to report first-quarter financial results after market close Wednesday.

Here are the key earnings expectations from analysts and what the big items are to watch.

Analyst Estimates: For the first quarter, analysts are expecting Meta Platforms to report revenue of $27.62 billion, according to data from Benzinga Pro.

For comparison, Meta Platforms reported revenue of $27.91 billion in last year’s fiscal first quarter, meaning a drop in revenue is expected.

Meta Platforms reported revenue of $27.91 billion, $28.82 billion, $27.71 billion and $32.17 billion for the first through fourth quarters of 2022, respectively. The last three of the revenue totals missed estimates from analysts.

For earnings per share, analysts are expecting Meta Platforms to report $2.03 for the first quarter. This would be a significant drop from last year’s $2.72 reported. In the last two quarters, Meta Platforms has beaten earnings per share estimates.

Related Link: Meta Options Traders Bet On Stock Recovering Some Losses By Friday

What Analysts are Watching: Morgan Stanley analyst Brian Nowak recently reiterated an Overweight rating on Meta Platforms.

The analyst, who has a price target of $250 on META, saw the company benefitting from the growth of artificial intelligence initiatives. Among the items the analyst is watching is generative AI tools that could increase engagement and ad unit monetization across the company’s social media platforms.

RBC Capital analyst Brad Erickson recently reiterated an Outperform rating and a $225 price target on Meta Platforms.

The analyst was cautious on Meta Platforms with some changes found that could be attributed to consumer weakness. Erickson will be watching to see if there was weakness in engagement and advertising spending.

In April, Wolfe Research maintained an Outperform rating and raised the price target on META to $260. Bank of America also maintained a Buy rating and raised the price target to $250.

While most analysts have been bullish on META in recent months, New Street Research downgraded the stock to Neutral with a $220 price target.

AI vs. Metaverse: Over the years, Meta Platforms has been aggressive in pushing for growth in the metaverse sector, even going as far as changing its name. There are new reports that Meta Platforms may be pivoting to or pushing deeper for growth in artificial intelligence over the metaverse.

A company memo cited by Reuters shows that Meta Platforms was looking to spend more on AI initiatives.

“We have a significant gap in our tooling, workflows, and processes when it comes to developing for AI. We need to invest heavily here,” the memo said.

The push for AI growth could come as companies like Microsoft Corp MSFT and Alphabet Inc GOOGGOOGL have invested heavily in artificial intelligence and have made the sector a key topic discussed during its earnings report and earnings calls.

Meta’s push to the metaverse may have slowed its efforts to grow artificial intelligence tools for its advertising platform and social media apps.

Chief Technology Officer Andrew Bosworth recently said that generative AI was what he and Meta CEO Mark Zuckerberg have been spending most of their time on.

Comments on artificial intelligence during the call and less commentary on the metaverse could signal a shift in company focus for Meta Platforms.

Job Cuts: One of the biggest topics for Meta Platforms has been job cuts, an item that was cheered by investors in late 2022, but has been a source of contention from existing employees.

Another round of layoffs could come for the company in May 2023. At a recent town hall, Zuckerberg said he couldn’t rule out future layoffs in 2024 or 2025.

One employee asked Zuckerberg directly about job cuts during the question-and-answer portion of the town hall.

“You’ve shattered the morale and confidence in leadership of many high performers who work with intensity. Why should we stay at Meta?” the employee asked.

Zuckerberg told employees he hopes they are with the company because they believe in the future vision.

“There’s no other company in the world that delivers social experiences at the scale that we are and that does so across such a diversity of different products and use cases. So if you want to reach people in the billions and have a massive impact, I think this is a great place to be,” Zuckerberg said.

Analysts and investors will closely be monitoring comments about job cuts during the first quarter results.

META Price Action: Shares of Meta Platforms have rebounded in 2023, up over 70% year-to-date. Shares trade at $211.30 versus a 52-week range of $88.10 to $222.11.

Read Next: Mark Zuckerberg Faces Backlash Over Plans To Let Children Access Metaverse 

Market News and Data brought to you by Benzinga APIs
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsNewsTop StoriesTechTrading IdeasAI stocksartificial intelligenceBrad EricksonBrian NowakExpert IdeasJob cutsLayoffsMark Zuckerbergmetaversemetaverse stocksMorgan StanleyRBC Capital
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!