BofA note: Revenue strength could ease AI spending uncertaintyStrong Q can reinforce confidence in AI ad engine: With AI ROI a key stock sentiment driver, 2Q positives could include:
1) Ad rev upside reinforcing confidence in Meta’s AI ad engine,
2) strong road map for 2H ad products,
3) optimism on new revenue opportunities for AI (Llama licensing, subscriptions, etc.) With Street likely anticipating 2Q revenue upside, risks are high expectations and higher expenses offset revenue revisions. Also, EU regulatory uncertainty is likely to continue.
AI positioning optimism reinforced by performance:
Given recent CEO posts, we expect big focus on AI investment and opportunities on the call, with possible updates on Llama and AI monetization strategies. Given audience scale, we continue to see Meta as one of the best AI opportunity stocks, with potential revenue upside as AI capabilities are integrated into the ad stack. At 24.5x our 2025 EPS, and with more investment coming, continued rev. momentum (which we expect) and a convincing AI product roadmap are key for maintaining sentiment & multiple.
