Meta Earnings Preview: AI Growth, New Search Engine, and Analyst Expectations

As Meta Platforms Inc. prepares to report its third-quarter earnings after market close on Wednesday, analysts are keenly watching several key areas, particularly the company’s advancements in artificial intelligence (AI) and its plans to develop a new search engine.

Analysts expect Meta to report third-quarter revenue of $40.27 billion, a significant increase from last year’s $34.15 billion, and earnings per share of $5.24, up from $4.39 in the same quarter last year. Meta has a strong track record, having beaten analyst estimates for revenue in eight consecutive quarters and for earnings per share in six straight quarters.

A major focus will be on Meta’s AI growth, with the company reportedly developing its own search engine to reduce its reliance on Google Search and Microsoft Bing. This move is seen as a strategic priority to minimize dependence on competitor platforms. Bank of America analyst Justin Post believes that Meta is well-positioned to develop internal AI assistant and query response capabilities, leveraging its large user base and content to train its large language models (LLMs).

The potential search engine could also enhance Meta’s advertising capabilities, particularly by utilizing search intent signals to power its core advertising products on Facebook and Instagram. Analysts from JMP and Bank of America highlight that Meta’s existing relationships with advertisers and small and medium-sized businesses (SMBs) could make its search tool highly monetizable.

Other key metrics to watch include ad impressions and the average price per ad, which saw a 10% year-over-year increase in the second quarter. The progress of Meta’s AI-powered ads business, messaging and Reels monetization, and any updates on capital expenditures, especially for generative AI, will also be closely observed.

Wall Street analysts are generally bullish on Meta’s earnings, with several firms maintaining “Buy” or “Outperform” ratings and raising their price targets. Bernstein, Jefferies, TD Cowen, Mizuho, and Goldman Sachs have all raised their price targets, reflecting optimism about Meta’s long-term growth trajectory and its AI-driven initiatives.