Meta Platforms’ 3Q earnings preview: Further market share gains on the horizon

When does Meta Platforms report earnings?

Meta Platforms (formerly Facebook) is set to release its quarter three (Q3) 2024 financial results on 30 October 2024 after the US market closes.

Meta Platforms’ 3Q 2024 results – what to expect

Expectations are for Meta’s Q3 revenue to register a 17.9% year-on-year (YoY) growth to US$40.3 billion, up from the US$34.1 billion a year ago. This will mark the second straight quarter of revenue growth slowdown (Q1 2024: 27.3%, Q2 2024: 22.1%).

Earnings per share (EPS) is expected to grow 19.1% YoY to US$5.23, versus the US$4.39 a year ago.

Meta poised for further share gains in the digital ad market

In 2Q 2024, Meta’s advertising sales increased 22%, double the growth rate of its top rival Google. It is likely to hold its edge over Google in 3Q 2024 as well, with ad revenue expected to grow 17.1% versus Google’s estimated 9.7%.

Meta’s hefty artificial intelligence (AI) spending may be paying off to some extent in driving Meta’s market share gains in the digital advertising industry. Any stronger-than-expected revenue growth may potentially validate further expansion of its dominance.

Further improvement in its ad pricing will be a good sign for investors as well, following through with its recovery cycle since 2023. That may also give an indication of whether Meta is holding up against competitor platforms like TikTok.

More clarity to be sought on investment spending

Thus far, Meta's investment in AI models, particularly Llama 3 and upcoming Llama 4, has been substantial, with Meta’s capital expenditure guided to be between US$37 billion and US$40 billion in 2024. While Llama 4 is set for release only in 2025, any signs of how these AI technologies may further contribute to revenue will be crucial.

Meta’s Reality Labs division (which handles virtual reality and metaverse initiatives) has also been a significant drag on profits. In 2Q 2024, operating losses for this segment came in at US$4.5 billion, a 20% increase from a year ago. Investors will remain on the lookout for spending levels and how soon these investments may start yielding results.

Meta expects “significant capital expenditures growth” in 2025 on AI research and product development efforts.

Key performance metrics under scrutiny (DAP, ad impressions, average price per ad)

In 2Q 2024, Meta’s Family daily active people (DAP) rose 7% YoY, while ad impressions and average price per ad both increased by 10% from a year ago. These healthy growth levels reflect robust demand for Meta’s advertising services, along with improved ad performance, and may serve as a validation to Meta’s better ad targeting capabilities.

Expectations are for such growth momentum to continue in 3Q 2024 to anchor Meta’s strong position in the digital ad market. Catalysts may include the US election period, which may bring significant political ad spending, while US economic outlook remains resilient to drive business confidence and more corporate ad spending.

Technical analysis – Bullish bias remain intact on broader upward trend

Trend indicators point to a bullish bias for Meta, with its share price supported by its daily Ichimoku Cloud, 200-day moving average (MA) and an upward trendline of higher lows since November 2022. Its weekly relative strength index (RSI) also shows that Meta’s share price has been trading above its mid-line since January 2023, which leaves buyers in control. This will leave buying-on-dips as the preferred approach, with the US$539.16 level offering a near-term support to watch, followed by the US$480.20 level.

On the upside, the key psychological US$600.00 level has served as resistance lately. Any punch above the US$600.00 level may leave the US$684.56 level on watch next based on a Fibonacci extension level (from Sep 2021 to Oct 2022).