Meta earnings on deck as Google, Snap see solid ad gains powered by AI targeting

Updated at 9:46 am EDT

Meta Platforms  (META) - Get Free Report shares moved lower in pre-market trading ahead of the Facebook and Instagram owner's third quarter earnings slated for after the closing bell.

Meta, the mega-tech company most sensitive to changes in the digital ad market, is expected to see overall revenues rise around 21.3% to $33.6 billion, according to Street forecasts, while posting a bottom line of $3.63 per share.

Google parent Alphabet  (GOOGL) - Get Free Report, its larger tech rival, posted a record ad revenues of $59.65 billion for the September quarter, while upstart messaging app maker Snap  (SNAP) - Get Free Report notched a surprise gain in third quarter sales as its AI-led efforts to created targeted ads starts to bear fruit.

That could suggest Meta, which is also deploying AI technologies to enhance the 'return on ad spend', or ROAS, of its global client base could surprise markets with either a stronger third quarter or a boost in its near-term projections.

Meta unveiled a series of new AI-related tools it plans to roll-out across its various apps earlier this year, including a chatbot similar to ChatGPT for Facebook Messenger and WhatsApp and has said its been working with advertisers in testing consumer-facing generative AI techniques.

At present, analysts expect the group to forecast fourth quarter revenues of $38 billion to $43 billion, a level that would likely suggest 2024 sales growth the 'mid to low teen' percentages. 

One impediment to that forecast, however, could be linked to reports that Meta is considering adding an ad-free paywall to its two biggest platforms in Europe, where it has around 409 million users active on the platform on a monthly basis.

The Wall Street Journal reported suggested Meta could charge as much as €19 per month for users to have ad free accounts on both mobile and desktop, with the base price of an ad-free desktop Facebook account priced at €10 per month.

Meta's capital spending plans will also be in focus as it guides investors into the final months of the year and beyond while it continues to warn of "meaningful" operating losses for its Reality Labs unit, the division that houses the company's metaverse ambitions. 

Analysts expect a 2024 capex forecast of between $38 billion to $43 billion. 

Another issue likely to capture investor focus relates to yesterday's decision by a group of 33 state attorneys general to file a lawsuit against Meta, accusing it of contributing to a youth mental health crisis by misleading the public about the dangers of social media platforms and encouraging children into addictive activity.

"Meta has harnessed powerful and unprecedented technologies to entice, engage, and ultimately ensnare youth and teens," the suit alleged. "Its motive is profit."

Meta Platforms share were marked 2.22% lower in early Wednesday trading to change hands at $305.40 each.

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