Meta Posts Strong Q1 Results, Plans More Investment Despite Dip in China Gaming Ads

Key Takeaways

• Meta’s Q1 earnings beat Wall Street’s expectations.
• However, CFO Susan Li acknowledged that there was a decline in ad spending among Asian e-commerce retailers and Chinese game advertisers.
• Nevertheless, the firm raised its capital expenditure forecast for 2025 as it expects to spend more on AI infrastructure.

Meta posted stronger-than-expected Q1 earnings on Thursday, April 1, and vowed to ramp up investment in AI data centers, despite the ongoing U.S. trade war.

Nonetheless, CFO Susan Li acknowledged some challenges related to “uncertainty [in how] the macro environment will evolve over time,” which had reduced some customers’ spending.

Meta Beats Earnings Expectation, Bumps 2025 CapEx Forecast

In the first quarter of 2025, Meta generated $42.3 billion in revenue, a 16 percent increase compared to the same period last year and above the Wall Street consensus of $41.3 billion.

The strong results were matched with an increased capital expenditure forecast. Meta’s total expenditure for 2025 is now expected to climb to $64–72 billion from a prior outlook of $60–65 billion.

AI Spending

Following the trend of recent quarters, most spending will be on infrastructure, including new data centers, servers and fiber optic networks.

“This updated outlook reflects additional data center investments to support our AI efforts as well as an increase in the expected cost of infrastructure hardware,” Li noted.

Defending the increased spending, she said:

“We really believe that our ability to build world-class infrastructure gives us a meaningful advantage in both developing the leading AI technology and services over the coming years.”

Impact of Tariffs

Reflecting similar comments from Google last week, Li acknowledged that U.S. trade policy had led to decreased ad spending by Asian exporters.

“We have seen some reduced spend in the U.S. from Asia-based e-commerce exporters, which we believe is in anticipation of the de minimis exemption going away on May 2,” she stated.

Prompted to expand on the matter by Evercore ISI’s Mark Mahaney, she noted that the decline in ad spending was especially prominent in the gaming vertical, which experienced negative revenue growth year-over-year.

Li put this down to a drop-off in China-based advertisers, who she said promoted a larger volume of game titles in Q1, 2024.