Meta posts $16.6 billion profit in Q1 2025, fuelled by AI-driven ad growth

New Delhi: Meta Platforms reported a robust 16% year-over-year increase in advertising revenue for the first quarter of 2025, reaching $41.39 billion, surpassing Wall Street estimates of $40.5 billion. 

The strong performance was driven by AI-enhanced ad tools and growing user engagement across its Family of Apps.

The parent company of Facebook, Instagram, WhatsApp, and Messenger posted total revenue of $42.31 billion, a 16% rise from $36.46 billion in Q1 2024, beating analyst forecasts of $41.36 billion. 

Meta, the parent company of Facebook and Instagram, posted a net profit of $16.64 billion for the January–March quarter — a 35% increase compared to the same period last year.

Ad revenue, which accounts for 97.8% of Meta’s total revenue, remained the company’s lifeblood, fueled by a 5% increase in ad impressions and a 10% rise in average price per ad.

CEO Mark Zuckerberg credited AI-driven ad targeting and recommendation tools for the growth, noting that enhancements have boosted engagement, with daily active people (DAP) across Meta’s apps rising 6% to 3.43 billion. “Our AI tools are driving better ad performance and user experiences, positioning us well to navigate economic uncertainty,” Zuckerberg said on a conference call. 

He highlighted Meta AI, now with nearly 1 billion monthly users, as a growing platform for future ad opportunities, though monetisation is not expected until 2026.

The results come amid fears of an ad revenue slowdown due to US tariffs on Chinese goods, currently at 145%, which have prompted pullbacks from China-based advertisers like Temu and Shein. These advertisers account for over 10% of Meta’s ad revenue, and analysts estimate potential losses of up to $7 billion in 2025 if trade tensions escalate. 

Chief Financial Officer Susan Li acknowledged “some reduced ad spend from Asia e-commerce exporters” but emphasised Meta’s diversified advertiser base and AI innovations as buffers.

Meta also raised its 2025 capital expenditure forecast to $64 billion–$72 billion, up from $60 billion–$65 billion, reflecting heavy investments in AI data centres and infrastructure hardware. The company warned of regulatory headwinds in Europe, where a European Commission ruling on Meta’s ad-free subscription model could impact 16% of its 2024 revenue as early as Q3 2025.

Meta’s Reality Labs division, focused on the metaverse and AI glasses, reported a $4.21 billion operating loss, though Zuckerberg highlighted tripling sales of Ray-Ban Meta AI glasses as a bright spot. 

The company faces ongoing scrutiny in a US Federal Trade Commission trial seeking to unwind its acquisitions of Instagram and WhatsApp, but the litigation is not expected to impact near-term results.

For Q2, Meta projects revenue of $42.5 billion to $45.5 billion, aligning with estimates of $43.84 billion.