BofA: Meta Platforms 1Q Preview - Expecting a Beat, Macro Sensitivity & AI Costs in Focus
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Bank of America expects Meta Platforms to exceed first-quarter expectations, projecting revenue of USD 56 billion and EPS of USD 7.44, compared to the consensus estimates of USD 55.4 billion and USD 6.64. Channel checks indicate that first-quarter advertising spending aligned with advertiser expectations, showing no material budget reductions tied to Middle East geopolitical tensions, while e-commerce spending accelerated throughout the quarter. Operational discipline remained solid, with job postings declining 33% quarter-over-quarter, paving the way for another EPS beat. However, near-term risks are concentrated in macroeconomic uncertainties potentially impacting second-quarter revenue guidance, alongside mounting AI infrastructure investments that could drive 2026 capital expenditures higher. BofA models second-quarter revenue guidance at USD 57.5-60.5 billion, reflecting 21-27% year-over-year growth. The firm maintains a Buy rating but trims the target price from USD 885 to USD 820. This adjustment applies a 24x multiple to the 2027 EPS estimate of USD 33.65, reflecting broader market valuation compression, down from the previous 26x multiple. The introduction of the new Muse Spark large language model mitigates lingering stock overhangs, with early data suggesting substantial performance improvements. These AI advancements should enhance Meta AI query results, automated messaging, and agentic capabilities, further strengthening the core advertising business.