“Will Meta’s Increased Investment in AI Drive Stock Growth?”

Published On: April 14, 2025 10:17 am

Meta Leverages AI to Enhance User Engagement and Advertising Revenue

Meta Platforms (META) is significantly utilizing artificial intelligence (AI) to boost user engagement across its family of platforms, which include Facebook, Instagram, WhatsApp, Messenger, and Threads. Last week, the company introduced new AI features to its Ray-Ban Meta glasses, marking their expansion in the United Kingdom.

Scope of Meta’s Digital Influence

With over 3.35 billion daily users, Meta Platforms holds a vast amount of data, making it a key player in the digital advertising sector, alongside Alphabet (GOOGL) and Snap (SNAP). This extensive reach is reflected in Meta’s advertising revenues, which surged 20.9% on a year-over-year basis to reach $46.78 billion. This revenue constituted 96.7% of the company’s fourth-quarter income. When adjusted for currency fluctuations, revenues still showed a strong growth of 21% year over year.

Innovations in Advertising Technology

To enhance advertisers’ return on ad spend, META employs a proprietary machine learning system called Andromeda for ad recommendations. This system utilizes NVIDIA’s (NVDA) Grace Hopper Superchip along with specialized Meta Training and Inference Accelerator hardware. During the retrieval phase, Andromeda processes a massive number of ads, narrowing them down to a few thousand that exhibit the most relevance. Subsequently, advanced ranking models determine which ads will be displayed to users.

The integration of Andromeda enhances META’s advertising efficacy by delivering more targeted advertisements. Deploying this deep neural network on NVIDIA’s technology across Instagram and Facebook apps has led to over a 6% improvement in recall rates and an 8% boost in ad quality for select audience segments.

Meta AI Usage and User Engagement

Meta Platforms, Inc. Price and Consensus

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

Rising Trends in Meta AI Usage

Monthly active users of Meta AI have now reached over 700 million. The company’s latest updates aim to make AI more personalized, increasing engagement on its platforms. Notably, Meta is expanding AI capabilities across its messaging apps, which are now available in more than 100 countries.

Innovations in Augmented Reality

Incorporating advanced AI features into the Ray-Ban Meta glasses enhances their functionality. The recent update allows users to receive intelligent feedback on objects or scenes they are observing.

This update introduces visual recognition functionality that helps identify landmarks, translate text in different languages, and offer contextual information. An upcoming feature will enable live translation of conversations among English, Spanish, Italian, and French, furthering Meta Platforms’ objective of enriching daily experiences through augmented reality (AR).

Market Performance and Expectations

META Stock Performance Compared to Peers

Over the year, META shares have dropped 7.2%, although they have outperformed the wider Zacks Computer & Technology sector, which saw a decline of 14.5%. In contrast, Alphabet and Snap shares have decreased by 17% and 26.1%, respectively.

The introduction of Llama 4 models, available through Amazon Web Services (AWS), underscores Meta Platforms’ increasing involvement in AI and AR. These models, such as Llama 4 Scout 17B and Llama 4 Maverick 17B, are adept at both image and text processing, enhancing their suitability for AR applications.

The integration of these models with Amazon SageMaker JumpStart and Amazon Bedrock is expected to propel their adoption, aligning Meta’s AI vision with its consumer products, particularly its smart glasses.

Focus on User Safety and Future Growth

Meta Platforms is also committed to improving safety across its services. The company has launched numerous initiatives aimed at ensuring a secure online experience for users, particularly focusing on preventing harmful content and scams. These efforts could contribute to the growth of Meta’s user base.

Positive Outlook for Q1 2025

Looking ahead, Meta anticipates total revenues between $39.5 billion and $41.8 billion for Q1 2025, reflecting an expected year-over-year growth of 8-15%.

The consensus estimate for Q1 2025 revenues sits at $41.24 billion, which would represent a 13.20% increase over the same period last year. Earnings per share are estimated to be $5.22, indicating year-over-year growth of 10.83%.

For further insights, discover the latest EPS estimates and surprises on Zacks earnings Calendar.