Next week is shaping up to be a big week for the big tech brigade with several of the market heavyweights set to report Q2 earnings. Meta (NASDAQ:META) will be among those taking center stage with the social media giant slated to release its quarterly statement next Wednesday (July 30).
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Although there were some mild investor concerns heading into the first quarter readout, Meta delivered strong results, and its guide was broadly in line with Street expectations.
Heading into the Q2 print, Scotiabank analyst Nat Schindler thinks the “setup is also attractive,” anticipating revenue will reap the benefits of FX tailwinds. Schindler anticipates that tariffs will continue to be a headwind in Q2, though the negative impact should be offset by stronger ad spending from non-U.S. markets, helped by a weaker dollar. Looking ahead, the analyst expects the tariff effect to ease gradually in the second half of 2025, while noting that Temu’s impact was more limited than initially expected. Schindler also sees WhatsApp monetization kicking off in 2H, with potential to add around 2–3% to run-rate revenue by the end of 2026.
On the tech side, continued advances in neural networks are enhancing algorithm performance, leading to better ad returns over the coming year. However, margins are likely to come under pressure. Depreciation is expected to weigh on gross margins throughout 2026, particularly with the rollout of the planned 5GW Hyperion datacenter, adding to cost pressures. Additionally, AI-related hiring is likely to drive higher capex, as existing models are retrained and run alongside GenAI initiatives. All in, Schindler expects gross margins to remain steady this year but decline in 2026.
There are also a few broader, longer-term thoughts Schindler thinks are worth noting. Meta’s AI Research Lab (FAIR) faced some challenges this quarter, following the departure of its former head of AI research – raising some questions about internal momentum. Meanwhile, the company rolled out Llama 4, drawing attention for its strong cost-efficiency, which could support wider adoption. Some believe upcoming reasoning models could further improve performance, and Meta’s scale in data and compute remains a clear advantage. That said, critics have flagged gaps in reasoning and conversation quality compared to GPT-4o, along with more limited multimodal capabilities. On the infrastructure front, Meta announced plans to invest roughly $1 billion in a new data center in central Wisconsin, underscoring its continued push into AI and cloud capacity.
While Schindler thinks that Meta has a path to improving ad ROI through more effective targeting, given the scale of its current spending, he needs to see clearer signs of a “stronger monetization strategy before getting more positive.”
As such, Schindler maintained a Sector Perform (i.e., Neutral) rating on the shares although his price target goes from $525 to $675. However, the new figure sits 4% below the current share price. (To watch Schindler’s track record, click here)
Schindler is amongst a minority on Wall Street. 3 others join him on the META fence, yet with an additional 41 Buys, the stock claims a Strong Buy consensus rating. At $755.95, the average target makes room for one-year gains of 7%. (See Meta stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.