Meta Q4 Earnings Preview: Retail Bullish Despite DeepSeek Threat, Lingering Macro Economic Uncertainty

Social media giant Meta Platforms, Inc. (META) is scheduled to report its fiscal year 2024 fourth-quarter results after the market closes on Wednesday. 

An earnings call hosted by the management is scheduled for 5 p.m. ET.

The Meta stock slipped modestly ahead of the report. It has risen 15% in January on top of the 66% rally in 2024. Retail sentiment toward the stock remained ‘bullish’ (64/100) and message volume stayed at ‘extremely high’ levels.

Key Q4 Expectations

Wall Street analysts expect Meta, based in Menlo Park, California, to report earnings per share (EPS) of $6.76 and revenue of $46.99 billion. 

The Mark Zuckerberg-led company reported EPS of $5.33 and revenue of $40.11 billion in the same quarter last year and $6.03 and $40.59 billion, respectively, in the third quarter.

The guidance issued in late October envisages revenue of $45 billion to $48 billion for the fourth quarter.

Meta has reported double beats in each of the past four quarters.

Third-quarter revenue growth was19%, with advertising contributing 99% of the total revenue. Daily active people (DAP) for Meta’s family of apps, was at 3.29 billion for September, and ad impressions and average price per ad climbed 7% and 11%, respectively.

Ad Revenue Trends

Wedbush analyst Scott Devitt said in a recent note that fourth-quarter advertising trends remained promising, with Meta particularly seeing strength.

Given ad spending’s sensitivity to macroeconomic fundamentals, uncertainty on that front clouds the outlook. 

Investor Focus 

Meta stock came under pressure recently due to the fears that Chinese artificial intelligence (AI) startup DeepSeek’s large-language model (LLM) would threaten the company’s offerings. 

An exclusive Information report said leaders of the social media giant’s AI teams worried that the company’s next-generation Llama, an LLM, wouldn’t perform as well as DeepSeek.

Investors are also likely to focus on the Reality Labs business, which has so far been raking up huge losses. 

That said, a Business Insider report, citing an internal memo, said the business beat nearly all sales and user targets in 2024, with sales growing 40%. Meta’s Chief Technology Officer, Andrew Bosworth, reportedly announced a series of reorganizations for the unit. 

Given the heavy AI investments needed to stay competitive, Meta’s capital expenditure is in the spotlight. 

Meta raised the low end of its 2024 capital expenditure outlook to $38 billion from $37 billion in late October.

It also hinted at a significant acceleration in infrastructure expense growth next year due to higher growth in depreciation and operating expenses of its expanded infrastructure fleet.

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