Meta Platforms expected to top earnings estimates as ad growth remains healthy, says BofA

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Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB) is expected to deliver second quarter results above Wall Street expectations when it reports earnings on July 29, according to Bank of America analysts, who believe that healthy advertising demand and AI-driven improvements should support revenue and earnings despite foreign exchange headwinds.

Bank of America revised its estimates and now expects Meta to report Q2 revenue of $60.6 billion and earnings per share of $7.50, above the consensus estimates of $60.2 billion and $7.18, respectively. The firm wrote that stronger advertising trends were partially offset by the recent depreciation of the US dollar.

The analysts wrote that their channel checks indicate healthy ad growth during the quarter and expect upside to earnings following Meta's workforce reductions in May. They also estimate that investors will focus on AI-related initiatives during the earnings call, including content retrieval and advertising improvements from AI model integration, opportunities for Muse Spark, and the potential for external compute sales.

Looking ahead, Bank of America expects Meta to guide Q3 revenue to between $60.5 billion and $63.5 billion, representing growth of roughly 18% to 24% year over year. The firm estimates Q3 revenue of $63.5 billion and earnings per share of $7.22, compared with consensus expectations of $63 billion and $7.03.

On spending, the analysts estimate Meta could lower the upper end of its expense guidance by $1 billion to $2 billion following recent layoffs. However, they also see the potential for the company to raise its capital expenditure outlook to between $135 billion and $150 billion from the current range of $125 billion to $145 billion, citing higher memory costs.

Bank of America also raised its longer-term forecasts, adding $5 billion in estimated 2027 revenue to reflect potential AI capacity benefits following reports of a possible compute agreement with Anthropic. The firm now estimates 2027 revenue of $316 billion and earnings per share of $35.00, while also increasing its 2028 revenue forecast.

The bank reiterated its 'Buy' rating and maintained its $835 price objective, above current levels of about $650.

It wrote that Meta's valuation does not fully reflect the potential benefits of expanding AI capacity and identified growing visibility into new revenue streams, advertising gains from large language model integration, continued AI model improvements and chip advances as potential drivers of future sentiment.

It also highlighted risks including the possibility of higher 2027 capital spending, capital raises and an upcoming social media addiction trial expected to begin in August.