In the year 2025, shareholders of Meta Platforms (META) have experienced quite a rollercoaster journey. The shares initially skyrocketed by over 25% during the first half of the year. However, they subsequently plummeted by roughly one-third by early April. Remarkably, the stock has almost completely bounced back to levels reached earlier in the year. At present, it stands a gain of approximately 22% for the year so far.
As the growth stock recovers significantly before Meta’s upcoming second-quarter earnings announcement next week, the spotlight is intensifying. Will Meta live up to expectations? Furthermore, does the stock continue to hold value at its current price level?
Soaring profit and big AI bets
It appears that the primary factors contributing to Meta’s impressive stock market success this year are its solid financial results and the bold moves it has made in the field of artificial intelligence (AI). Investors are optimistic about these decisions, as they believe they could lead to fresh income sources and rapid sales expansion in the future.
Examining the financial health of Meta, its recent earnings have stood out as remarkably strong. This strength is attributable to a blend of high single-digit revenue increases and substantial enhancements in operating margins. Consequently, earnings per share have experienced rapid expansion. To illustrate, first-quarter revenue jumped by 16% compared to the same period last year, while the operating margin expanded from 38% to 41%. This led to an earnings per share of $6.43, a 37% increase from the previous year. Factors contributing to this growth include an uptick in daily active users, ad impressions, and average ad prices. These metrics saw increases of 6%, 5%, and 10%, respectively, during Q1.
Additionally, the heightened attention of Meta’s founder and CEO on artificial intelligence projects is shaping investor opinions regarding the stock as well.
In a recent earnings conference, Meta CEO Mark Zuckerberg announced that approximately a billion users interact monthly across our apps, thanks to Meta AI. This year, our primary goal is to enhance the user experience and establish Meta AI as the premier personal AI, with a strong focus on tailored experiences, voice interactions, and entertainment-centric features.
After making those assertive statements, Zuckerberg has been consistently backing up his words by actively recruiting top-tier AI professionals, marking an extensive hiring phase for Meta.
What to expect from Q2
As Meta prepares to release its second-quarter financial report next week, investors can anticipate continued robust growth in both revenue and profit. Management has projected that the second-quarter revenue will fall within the range of $42.5 billion to $45.5 billion, which indicates a potential increase of 8.8% to 16.5%. This estimated growth rate exceeds the current average analyst forecast of approximately 14.5% year-over-year growth, which equates to an anticipated revenue of around $45.8 billion.
Based on the substantial impact of Meta’s operating leverage in Q1, it’s reasonable to expect an even greater increase in operating margin in Q2. Consequently, if we exclude any unusual costs, the growth rate of earnings per share is likely to outpace that of overall revenue in Q2.
Meta stock: Buy, sell, or hold?
It’s worth noting that despite Meta’s stock rising, its shares are still relatively affordable, trading at approximately 28 times earnings as we speak. Given the company’s robust recent revenue growth and expansion in operating margins, this valuation seems justifiable. Moreover, when you factor in Meta’s history of consistently strong earnings-per-share growth, it becomes even more appealing to investors.
Could we say instead: Given its recent price increase, is Meta’s stock a good investment? I find that it still appears reasonably priced at present. However, there are significant potential risks to consider. Primarily, investors should be aware that Meta’s revenue heavily relies on advertising. If the economy experiences a downturn, businesses might decide to cut back on their ad spending. Furthermore, while Meta’s focus on artificial intelligence is intriguing, it carries an element of speculation. For example, it remains uncertain whether the future income generated from AI products will offset the substantial costs related to research and development in this area.
All things considered, I think stocks remain appealing at their present value. However, considering the potential risks, it’s advisable for investors to maintain a relatively small stake in the company when compared to their total investment portfolio.
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2025-07-23 16:02