Can Meta Platforms' Expanding AI Focus Push the Stock Higher?

Meta Platforms META is leveraging AI to improve user engagement across its various platforms, including Facebook, Instagram, WhatsApp, Messenger and Threads. Last week, the company expanded AI features to its Ray-Ban Meta glasses in the United Kingdom. 

Meta Platforms hosts a data trove thanks to its more than 3.35 billion daily users. META’s staggering reach makes it one of the most important players in the digital advertising sales market, alongside Alphabet GOOGL and Snap SNAP. This is driving Meta Platforms’ advertising revenues, which jumped 20.9% year over year to $46.78 billion and accounted for 96.7% of fourth-quarter revenues. At constant currency, revenues increased 21% year over year.

META focuses on improving advertisers’ return on ad spending. It is leveraging a proprietary machine learning system, Andromeda, for retrieval in ad recommendation. The system is powered by NVIDIA’s NVDA Grace Hopper Superchip and Meta Training and Inference Accelerator hardware. The retrieval stage processes tens of millions of ads into a few thousand relevant ads, which are further processed by sophisticated ranking models to determine the final ads to be shown on its platforms.

Andromeda improves the performance of META’s advertising system by delivering more personalized advertisements to viewers. The deployment of META’s deep neural network on the NVIDIA Grace Hopper Superchip across Instagram and Facebook applications has achieved more than 6% recall improvement to the retrieval system while delivering over 8% ad quality improvement on selected segments. 

Meta Platforms, Inc. Price and Consensus

Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote

Rising Meta AI Usage Bodes Well for META Stock

Meta AI usage continues to increase, with more than 700 million monthly actives. The company’s initiative to add updates that will help Meta AI deliver more personalized and relevant responses is expected to boost engagement. Meta Platforms is now launching Meta AI across its messaging apps and is currently available in more than 100 countries.

The addition of advanced AI features to the Ray-Ban Meta glasses enhances real-world interactions. The latest update allows users to receive intelligent responses about objects or scenes users are viewing. 

The latest update includes visual recognition capabilities that enable the glasses to identify landmarks, translate foreign-language text, and provide contextual information on demand. An upcoming rollout of live speech translation between English, Spanish, Italian, and French further supports Meta Platforms’ goal to make daily experiences more intuitive, accessible, and immersive through the use of augmented reality (AR).

META Stock Benefits From Expanding Portfolio

META shares have lost 7.2% year to date (YTD), outperforming the broader Zacks Computer & Technology sector’s decline of 14.5% and peers, including Alphabet and Snap. YTD, shares of Alphabet and Snap have plunged 17% and 26.1%, respectively.

The launch of Llama 4 models, accessible through Amazon Web Services, signals Meta Platforms’ deepening involvement in AI and AR. These models, which include Llama 4 Scout 17B and Llama 4 Maverick 17B, are capable of processing both images and text, making them ideal for applications like AR. 

Amazon SageMaker JumpStart and Amazon Bedrock integration will ensure the widespread adoption of these models, aligning Meta Platforms’ AI vision with its consumer products, including its smart glasses.

Meta Platforms has been focusing on enhancing safety across its platforms. The company has implemented various initiatives to ensure that users have a safer and more secure online experience. META’s focus on safety and integrity by investing in tools, resources, and initiatives like Community Standards and digital literacy programs to protect users, especially young people, from harmful content and scams is expected to boost the user base.

META Offers Positive Guidance for Q1 2025

Meta expects total revenues between $39.5 billion and $41.8 billion for the first quarter of 2025, suggesting 8-15% year-over-year growth.

The Zacks Consensus Estimate for first-quarter 2025 revenues is pegged at $41.24 billion, suggesting a 13.20% increase from the prior-year quarter’s actual.

The consensus mark for first-quarter 2025 earnings is currently pegged at $5.22 per share, indicating 10.83% year-over-year growth. 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Zacks Rank

META currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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