Meta earnings should show continued ad dominance — but a new Apple battle looms

By Jon Swartz

Earnings preview: Meta reports third-quarter results Wednesday afternoon

Meta Platforms Inc. has an Apple Inc. problem.

Not a change to the iOS system that makes it harder for Meta (META) to glean personal information about consumers -- as Apple (AAPL) did in 2021, costing Meta billions of dollars in potential advertising revenue -- but a head-on collision in mixed-reality headsets that had one Meta worker telling Bloomberg News that the Facebook parent company is in the "afraid of Apple stage."

The market conflagration, expected in 2024, is a long-term barrier for Meta. In the interim, however, the social-networking juggernaut should sail along with robust ad sales as it slowly diversifies into augmented reality, virtual reality, artificial intelligence and the metaverse.

Hostile tensions between two of Silicon Valley's biggest companies are nothing new. Apple historically has chastised Meta for its privacy policies while Meta has dinged the iPhone maker for its closed product ecosystem.

While Meta changed its corporate name away from Facebook two years back to demonstrate its heavy focus on the metaverse, virtual reality is still a drop in the financial bucket for the social-media giant, which generates nearly all of its revenue from advertising. And analysts expect Meta to continue piling up ad revenue as the second-most prolific tech player after Alphabet Inc.'s (GOOGL) (GOOG) Google.

Google earnings preview: Ad spending is accelerating despite antitrust battle with feds

Jefferies analyst Brent Thill expects a third-quarter revenue beat when Meta reports results Wednesday afternoon, and he thinks that the fourth-quarter outlook will imply a reacceleration in revenue against easier comparisons to the year-earlier period.

Meta's ad growth is expected to spike 25% year-over-year in the third quarter and through 2024 on "rising Reels engagement and monetization," TD Cowen analyst John Blackledge said in an Oct. 12 note. Blackledge is also looking closely at Meta's cost outlook for 2024 as the company wraps up a self-ascribed "year of efficiency."

Despite elevated expectations into the fourth quarter, UBS analyst Lloyd Walmsley believes Meta's generative-AI consumer app push is "still underappreciated and not priced into shares."

Wedbush Securities analyst Scott Devitt expects strong digital-ad performance from Meta, Google and Snap Inc. (SNAP) in the second half of 2023 in spite of macroeconomic uncertainty.

Meta logged its highest close in more than a year on Oct. 11 ($327.82) amid an October rally.

-Jon Swartz

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10-24-23 0915ET

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