'Advertising-AI' Virtuous Cycle Boosts Meta's Performance… "Will Increase AI Investment Further"

Meta, which was expected to be hit by the Trump-initiated tariff war, announced results that far exceeded market expectations. The use of artificial intelligence (AI) in personalized advertising proved effective, significantly increasing advertising revenue, which accounts for most of the sales. Meta, which has announced a showdown with OpenAI and Google by launching its own AI app, plans to further expand its AI investment this year.

'Earnings Surprise' Driven by Strong Advertising Revenue

On the 30th (local time), Meta announced that its first-quarter revenue increased by 16% year-on-year to $42.31 billion (approximately 60.3 trillion won). This figure exceeds the Wall Street average estimate of $41.4 billion compiled by market research firm LSEG. Net income increased by 35% over the same period to $16.64 billion. Earnings per share (EPS) also exceeded market expectations (5.28 dollars) by more than 20%, reaching 6.43 dollars. Mark Zuckerberg, Meta's CEO, said during the earnings conference call, "We are well-positioned to respond to macroeconomic uncertainties."

The earnings surprise was driven by unexpectedly large increases in advertising revenue. In the first quarter, Meta's advertising revenue increased by 26.8% year-on-year to $41.39 billion, exceeding the market expectation of $40.44 billion. In particular, the number of ad impressions increased by 20%, and the ad price also increased by 6%, achieving qualitative growth.

Initially, the market expected companies to significantly reduce advertising due to the tariff policy of the Donald Trump administration. This is because consumer purchasing sentiment is deteriorating due to soaring tariffs, and Chinese e-commerce companies such as Temu and Shein, which are expected to be most affected by the tariffs, are considered major advertisers on SNS platforms. In fact, Google's competitor, Meta, announced its earnings on the 24th, stating that "there will be a weak headwind in advertising revenue," and Snap did not provide second-quarter guidance, stating "the advertising business was hit." In contrast, Meta presented second-quarter revenue guidance of $42.5 billion to $45.5 billion, in line with market expectations ($44.01 billion).

Increasing AI Investment This Year

In the tech industry, it is believed that Meta was able to achieve particularly strong advertising revenue thanks to its AI-based advertising strategy. In fact, Meta officially introduced AI-based automated advertising solutions such as 'Advantage Plus Campaign' in February, allowing companies to receive AI assistance in setting advertising targets, exposure locations, and budgets. While competitors are seeking monetization solely through AI models, Meta has directly applied AI to its advertising business, which accounts for 97.8% of its total revenue, leading to monetization.

Based on its confidence in 'AI monetization,' Meta significantly raised its capital expenditure forecast for this year. On this day, Meta slightly lowered its total cost range for this year from $114 billion to $119 billion to $113 billion to $118 billion, but raised its capital expenditure forecast from $60 billion to $65 billion to $64 billion to $72 billion. Susan Li, Meta's CFO, stated, "Additional data center investments and expected infrastructure hardware cost increases to support AI-related efforts have been reflected."

As Meta reaffirms its aggressive investment stance in AI, competition with OpenAI and Google is expected to intensify further. Meta launched an independent 'Meta AI' app, which had previously only operated within its SNS. Unlike other AI chatbots like ChatGPT, it attempted to differentiate itself by including a social feed where users can share how they use AI. It also enabled management of hardware devices such as its smart glasses 'Meta Ray-Ban' and extended reality (XR) device 'Meta Quest.'

Silicon Valley Correspondent Song Young-chan 0full@hankyung.com