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Meta (META) stock jumped after beating first quarter expectations, powered by strong ad revenue growth. Brad Erickson, RBC Capital Markets equity analyst, joins Morning Brief to break down the details. Erickson highlights whether Meta's ad revenue growth is sustainable and how artificial intelligence (AI) could drive future monetization.
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Meta shares popping today after topping first quarter expectations boosted by resilient ad sales helping to ease some concerns about the impact of the global trade war. CEO Mark Zuckerberg saying the tech giant is quote, well positioned to navigate the macroeconomic uncertainty. Joining us now with more Brad Erikson, RBC Capital Markets Equity Analyst. Brad, great to have you on this morning. Let's talk about that ad revenue here, that 20% ad revenue growth. At the end of the day, this is a company that lives and dies by its ad revenue. Is that kind of growth sustainable?
Yeah, thanks for having me. Um, I would say you're probably going to see some deceleration through the year, but again, off of 19% growth, constant currency, like that's, we can live with that. Those are still really, really good numbers, significantly ahead of peers. Google search on a comparable basis only grew 12%, which is also good, but clearly not 19. So yeah, we, you know, I think the ability to underwrite at least kind of mid-teens growth sustainably, you've got AI as kind of this persistent multi-year driver, I think everybody's going to be really pleased with that.
What are your anticipations around the monetization of that multi-year driver, Brad?
Yeah, so, uh, I think, you know, there's a few things going on that they talked about last night and have talked about for, really, now for over a couple of years, which is they're improving content recommendation, that's actively being driven by AI. They've improved their ad targeting and ranking engine. So that's helping. And then last night, you know, they talked about things like improving ad performance for the same level of compute. So now you're getting ad performance improvements as well as saving on the costs. Now, for today, that doesn't exactly foot with the CAPEX increase, so that's another story. Um, but again, bigger picture, the fact that they can improve the business and also improve that compute efficiency bodes really well over the next few years.
