Wall Street is bullish on Meta's Q2 performance ahead of its earnings report: 'One of the best AI opportunity stocks'

Business Insider

7 days ago

It's Meta's time to shine.
The Facebook parent is on deck to report earnings for the second quarter after the closing bell on Wednesday, and Wall Street analysts are feeling bullish on the tech giant's coming results.
Analysts are expecting the company to report $44.7 billion in revenue for the last three-month period, compared to $42.3 billion in revenue for the first quarter. Earnings per share are expected to come in at $5.86, according to Bloomberg data.
Wall Street has increasingly come to see Meta as a key AI play, with the company on track to roll out two major data centers and profit from AI-driven advertising on its platforms.
Earlier in the year, the company also said it would spend up to $65 billion in capex as AI becomes a central growth strategy to the company.
Here's what analysts are saying about the stock ahead of its next earnings report.
Bank of America: "Top Online ad stock"
Analysts at Bank of America said they expect Meta to beat consensus estimates for second-quarter earnings, pointing to positive checks they conducted on Meta's advertising business.
Revenue could come in around $45.5 billion, they estimated, at the higher end of Meta's guidance for the quarter.
In a note earlier this month, analysts called Meta a "Top Online ad stock" in 2025. That's because the company looks best-positioned to reap the benefits from AI-driven advertising, they wrote, which they believe could support a higher valuation for the stock.
But Meta's AI spending could be an issue.
"Expense risk on reports that Meta has ramped up AI hiring, and capex spend is the biggest concern into the print," analysts wrote last week, adding that they expected the company's total headcount to rise 2% for the quarter.
Analysts reiterated their "Buy" rating on the stock. Earlier this month, they lifted their price target to $775 from $765, which implies 8% upside from the stock's current levels.
Oppenheimer: Ads are a bullish factor
Oppenheimer lifted its revenue outlook for Meta through the rest of 2025. Revenue could climb 4% in the second quarter, 9% in the third quarter, and 3% in the fourth quarter, analysts wrote in a note last month, citing the reduced risk of a tariff-induced recession as well as an improved outlook for the online ad market.
Still, Oppenheimer said it saw a handful of key risks looming over the stock. Here are some of the potential headwinds they see:
Meta could struggle to innovate its AI features. "Scout" and Maverick," the company's latest AI models for Llama 4, "have dramatically trailed peers," Oppenheimer said.
Investors could sell Meta stock to divert proceeds to new tech IPOs.
Meta's ads could become less effective if privacy restrictions make it difficult for the company to track user data
The company faces competition from the likes of Google, Microsoft, Pinterest, Twitter, and TikTok.
Oppenheimer reiterated its "Outperform" rating on the stock and lifted its price target to $775 a share, implying 8% upside from current levels.
Needham: 'We expect META to over-deliver'
Needham had a mixed view of Meta headed into its second-quarter earnings. On the one hand, the firm's analysts upgraded their rating for the stock from "Underperform" to "Hold," citing two positive catalysts:
Rising revenue. "Based on our channel checks, we expect META to over-deliver on our prior rev and margin estimates for 2Q25 and FY 25," the analysts said, estimating that Meta would post 14% revenue growth and 6% earnings per share growth for the year.
High productivity. Meta's business could be more productive than other mega-cap tech firms, with the company scoring the highest on free cash flow relative to labor costs in 2024.
Still, analysts see a handful of risks ahead that held them back from rating the stock as a "buy." Risks include pressure on Meta's margins and free-cash flow, potentially higher-than-expected total labor costs due to stock-based compensation, and Meta's use of several strategies in its business, which "wastes capital and adds risks," analysts said.
Citizens: Capex could climb past $90 billion next year
Meta could lift its capital expenditures even higher as it ploughs more money into its AI and superintelligence projects, analysts at Citizens wrote in a note.
"With Meta making material investments in its superintelligence team, including researchers and compute, we believe the company is going through a significant investment cycle and we expect 2026 CapEx to surprise the Street as Meta builds multiple 1GQ or greater data centers," they said, estimating capex could come in around $91 billion next year.
Stocks typically don't benefit when a company is going through an investment cycle, analysts said. But the situation could be different for Meta, as AI can enhance the ad experience for users.
"To that end, we believe more compute and access to better models can help sustain revenue growth and we moderately increase our growth estimates for Meta," analysts said.
The firm reiterated its "Market Outperform" rating and $750 price target on the stock, implying 5% upside from current levels.
CFRA Research: Hiring, ad spending, AI in focus
Angelo Zino, an analyst at CFRA Research, wrote this month that investors will likely be most interested in three things heading into Meta's earnings call:
The implications of the company's recent " AI hiring spree."
The health of Meta's ad spending across its social media platforms.
The company's monetization of AI and other growth initiatives.
Still, Zino said he expects Meta to meet its expected revenue targets for the second and third quarters, largely due to increased stability in the digital ad market.
Meta's ad impressions could see an increase of around 5%-6%, while the average price per ad could rise 9%-10% in both the second and third quarters, Zino said.
CFRA reiterated its "Buy" rating on the stock and lifted its price target to $800 from $750, implying 12% upside from current levels.