Meta Q2 2024 earnings preview: AI advancements and revenue growth in focus

When is Meta due to report?

Meta is set to report its second-quarter earnings on Thursday, 1 August at 6.05am (AEST) after the US markets close.

Key financial metrics

Last quarter, Meta reported a revenue beat of $36.46 billion versus the expected $36.16 billion and an earnings per share (EPS) beat of $4.71 per share versus the expected $4.32.

The company reported the following key numbers:

• Family Daily Active People (DAP): was 3.24 billion on average for March 2024, a 7% increase year-over-year
• Ad impressions: delivered across the Family of Apps increased by 20% year-over-year
• Average price per ad: increased by 6% year-over-year
• Headcount: fell to 69,329 as of March, a 10% decrease year-over-year.

CEO optimism meets market skepticism

Meta's founder and CEO Mark Zuckerberg expressed optimism about the company's strong start to the year and said, "The new version of Meta AI with Llama 3 is another step towards building the world's leading AI. We're seeing healthy growth across our apps and we continue making steady progress building the metaverse as well."

Nonetheless, Meta’s Q1 2024 earnings report was met with market skepticism, particularly after its share price dropped 16% in after-hours trading. This was largely due to conservative Q2 2024 sales forecasts and higher anticipated capital expenses driven by investments in AI.

Family Daily Active People (DAP) in billions chart

What to expect

Revenue

For Q2 2024, Meta has projected revenues to be between $36.5 billion and $39 billion. The midpoint of this range, $37.75 billion, would represent an 18% year-over-year growth but is slightly below analysts' average estimate of $38.3 billion.

Expenses

The company has also revised its total expense forecast for 2024 to $96-99 billion, up due to increased infrastructure and legal costs. Full-year 2024 capital expenses are expected to be between $35 billion and $40 billion.

Stock performance

• Revenue: $38.29 billion vs. $36.46 billion in Q1 2024
• EPS: $4.70 vs. $4.71 in Q1 2024

Meta sales revenue by user geography chart

Key metrics and insights to watch for

• Advertising performance: advertising revenues increased by 27% in Q1. The market will be looking for a similar performance in Q2 2024
• User engagement metrics: DAP reached 3.24 billion on average in March 2024, a gain of 7% year-over-year. Investors will be looking for continued growth in this area
• AI integration and impact: contributed to strong financial results in Q1. Look for updates on how AI is improving user engagement, particularly in areas like Reels, where AI-powered recommendations have led to an 8-10% increase in watch time
• Expenses and profitability: Meta increased its capital expenditure outlook for 2024 to between $35 billion and $40 billion. Watch for any further increases to expense projections and their impact on profitability
• Reality Labs performance: includes virtual, augmented, and mixed reality-related consumer hardware, software, and content used in developing the Metaverse. Analysts expect the division to show an operating loss of $4.31 billion for Q2
• Forward guidance: investors will look for guidance on Meta's outlook for Q3 and the rest of 2024, as this will provide insights into expected growth and challenges.

Meta technical analysis

Meta's share price soared 194% in 2023, reclaiming all and more of the losses it suffered in 2022 after hitting a low of $88.09. Meta has extended its gains in 2024, reaching a fresh record high of $542.81 in early July. Notably, the high was made on selling, with the Meta share price falling 15% in the following two weeks.

Meta weekly chart

While Meta’s share price has been able to ride the AI tech frenzy higher in 2024, we note the bearish divergence that occurred at the early July $542.81 high, evident via the relative strength index (RSI) indicator. Bearish divergence and the possibility of a completed five-wave Elliott Wave advance from the $88.09 low to the $542.81 high indicate that Meta’s share price may have already entered a correction.

This could see Meta’s share price test support in the $426/$414.50 area, which includes the 200-day moving average and the April $414.50 low. Buyers would be expected to be operating in this support region, in anticipation of the uptrend resuming.

Meta daily chart

• _{Source: TradingView. The figures stated are as of 23 July 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}