Meta Platforms Q3 Earnings Preview: AI in Focus with New Search Engine Plans, Analyst Says Company Is 'Well Positioned' – Meta Platforms (NASDAQ:META)

A new report that Meta Platforms Inc META is building its own search engine, there could be a greater focus on AI growth when the company reports third-quarter results after the market closes on Wednesday.

Earnings estimates: Analysts expect Meta Platforms to report third-quarter revenue of $40.27 billion, compared to last year's third-quarter revenue of $34.15 billion, according to data from Benzinga Pro.

The company has beaten analysts' revenue estimates for eight consecutive quarters.

Analysts expect Meta Platforms to report third-quarter earnings per share of $5.24, up from last year's third-quarter earnings of $4.39. The company has beaten analysts' earnings per share estimates for six consecutive quarters.

Meta's forecast assumes third-quarter revenue will be between $38.5 billion and $41 billion.

Also Read: Meta Platforms is building an AI-powered search engine to reduce Google and Microsoft's dependence on Alphabet: Report

What Analysts Say: A new report from The Information detailing that Meta is developing its own search engine to power the Meta AI chatbot is of interest to Bank of America analyst Justin Post ahead of the earnings report release.

“We believe the report makes sense as reducing dependence on large technology companies is likely a strategic priority for Meta,” Post said.

The analyst said Meta's conference call would likely include comments on artificial intelligence and search capabilities.

“The article suggests that by developing its own search engine, Meta wants to reduce its dependence on Google Search and Microsoft Bing, which currently provide information to Meta AI.”

Post said Meta's development of its own search engine was consistent with the company's long-term goal of reducing “reliance on competing platforms.”

“We believe Meta is well positioned to develop internal AI assistants and query response capabilities.”

The analyst highlights Meta's large user base and content that could help train its own LLM (large language model).

Post said the news could be negative for alphabet However, the stock did not respond to the report.

“As users increasingly use meta-AI to obtain information, there is a possibility that some internet traffic will shift away from Google search.”

Here are other recent analyst ratings for Meta Platforms and their price targets:

• Bernstein: Maintained outperform rating, raised price target to $675 from $600
• Jefferies: Maintain Buy rating, price target raised from $600 to $675
• TD Cowen: Maintained Buy rating, price target raised from $600 to $675
• Mizuho: Maintained an Outperform rating and increased its price target to $650 from $600
• Cantor Fitzgerald: Reiterated an Overweight rating with a $670 price target
• Goldman Sachs: Maintained Buy rating, price target raised from $555 to $636

Key points to keep in mind: Ad impressions and price per ad will be important metrics, and some will be watching to see if there is strength in the online advertising segment.

Meta reported second-quarter ad impressions and average price per ad both increased 10% year-over-year.

The progress of Meta's AI growth is being closely watched outside of the potential search engine.

“We had a strong quarter and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” said Meta CEO Mark Zuckerberg says the second quarter results.

The company's costs will also be closely watched this quarter, with Meta increasing its 2024 capital expenditures to a range of $37 billion to $40 billion following second-quarter results.

META price promotion: Meta shares rose 2.6% to $593.28 on Tuesday, compared with a 52-week trading range of $296.86 to $602.95. Meta stock is up 70.4% year-to-date in 2024.

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