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Meta Q1 2025 earnings preview: impact of tariffs and AI investments on revenue

Meta Platforms is expected to report 13.6% revenue growth in Q1 2025 amid concerns about advertising spending slowdown and continued AI investments, as share price has fallen 35% from February peak.

Meta Source: Adobe images
Meta Source: Adobe images

When does Meta report earnings?

Meta is set to release its quarter one (Q1) 2025 financial results on Thursday, 1 May 2025 at 6.40am (AEST).

Meta's Q1 25 financial expectations

Meta's Q1 2025 financial expectations:

  • Revenue: $41.4 billion, representing a 13.6% year-over-year increase (down from 20.6% growth in Q4 2024)
  • Earnings per share (EPS): $5.29, up 12.2% year-over-year (slowest EPS growth since Q1 2023)
  • Operating margin: expected to decline to 32.5%, down from 43.1%
Meta Platforms’ Q1 2025 results – what to expect Source: Refinitiv
Meta Platforms’ Q1 2025 results – what to expect Source: Refinitiv

Meta's share price down 35% from February 2025 peak amid valuation concerns

Economic and policy uncertainties stemming from US tariffs have put company valuations under renewed scrutiny, triggering a sharp unwinding in the Magnificent Seven stocks over the past two months. As such, Meta's share price has fallen more than 35% from its February 2025 peak.

While its price-to-earnings (P/E) ratio still stands at 20.7—potentially high in the current environment—it remains below its three- and five-year historical averages, as tariff-driven concerns have eroded some of its valuation premium. During the upcoming earnings call, it will be important to assess whether management can effectively reassure investors that any upcoming growth slowdown is temporary.

Tariff impact on advertising spending threatens Meta's core revenue stream

Being a services-based provider, Meta may be somewhat insulated from the direct effects of US tariffs, but it remains exposed to their broader, indirect impact. Advertising remains Meta's core revenue driver (96% of revenue), which is projected to slow to 13.3% year-on-year in Q1, down from 20.9% in Q4 2024.

With tariff-related uncertainties weighing on consumer and business sentiments, advertising budgets could face pressure—particularly from Chinese retailers like Temu and Shein. These firms may find it increasingly unviable to target US consumers due to steep tariff rates and the end of the de minimis rule—which previously exempts low-value imports from customs duties.

Investors will be monitoring for signs of resilience, especially around whether AI-driven value and higher ad pricing can offset the potential fall-off in advertising demand.

Return on $60-65 billion capital investments remains under scrutiny

Meta delivered strong performance in Q4 2024, with daily active users surging 58.8% to 3.35 billion and average revenue per user (ARPU) climbing 8.6% to $14.25—an encouraging sign that its substantial capital expenditures are yielding returns to a promising degree.

Looking ahead to Q1 2025, growth may be modest, with projections pointing to:

  • 9.5% increase in ARPU
  • 4.4% rise in daily active users

These metrics are underpinned by continued investments in AI and advertising infrastructure. With Meta reaffirming plans to spend between $60 billion and $65 billion in capital expenditures for 2025 to advance its AI ambitions, investors will be watching these core metrics closely to assess whether such aggressive spending is translating into sustainable growth.

Cost-cutting measures and layoffs aimed at protecting margins

During the quarter, Meta has implemented cost-cutting measures, including layoffs, to streamline operations and enhance efficiency. These layoffs follow similar reductions in 2022 and 2023, with investors likely to monitor whether further rounds of cuts are imminent.

Investors will be closely watching how management's strategy of deprioritising non-strategic areas, such as hardware and select Reality Labs projects, while prioritizing AI-powered tools, could help protect margins during this period of macroeconomic uncertainty.

Meta technical analysis

Meta's share price continues to exhibit a broader downward trend for now, marked by a consistent pattern of lower highs and lower lows. The daily relative strength index (RSI) has also struggled to break above its midline on three separate attempts.

Looking ahead, a stronger case for a trend reversal would likely require a decisive breakout above the key trendline resistance near the $540 mark. Such a move could pave the way for a retest of the critical 200-day moving average, with a reclaim of the key trendline offering a more compelling confirmation of a shift in trend.

Meta daily chart

Meta Platforms Inc Source: IG
Meta Platforms Inc Source: IG

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