Meta Q2 Earnings Preview: Can AI and WhatsApp Monetization Justify the Big Bets?

Meta Platforms ($META) is set to report its Q2 2025 earnings after the bell on July 30, and Wall Street will be watching closely. Expectations are high: analysts forecast revenue of $44.55 billion, up 14.6% year-over-year, and EPS of $5.84, up 14.3%. With the stock already up nearly 20% YTD, Meta has little room for disappointment.

But it’s not just about hitting the numbers—investors want clarity on whether Meta’s massive AI investments and WhatsApp monetization push are starting to pay off.

Advertising Still Pays the Bills

Advertising continues to be Meta’s bread and butter, accounting for more than 98% of total revenue. In Q1, ad revenue came in at $41.39 billion, up 16% YoY. Deutsche Bank estimates Q2 ad revenue at around $44 billion, helped in part by the company’s AI-powered ad targeting tools like Advantage+. These tools have reportedly improved ad conversion and return on ad spend (ROAS), helping offset recent weakness in ad spending from Chinese e-commerce players like Temu and Shein.

Interestingly, even as U.S. tariffs put pressure on Chinese advertisers, some of that spending appears to be rebounding—Temu resumed its U.S. campaigns in late June. Meta could surprise on ad revenue if this trend holds.

At the same time, Meta is expanding ad placements across its platforms, including WhatsApp and Threads. The upcoming rollout of ads in WhatsApp’s “Updates” tab, which serves 1.5 billion DAUs, could unlock a meaningful new revenue stream.

WhatsApp Monetization: A New Growth Engine?

WhatsApp has long been under-monetized, but that could be changing. Evercore estimates that even under conservative assumptions—$6 ARPU and 1.7 billion DAUs—WhatsApp could contribute over $10 billion in annual ad revenue by 2028, with roughly $5 billion in operating profit.

This would represent only a fraction of Facebook or Instagram’s ARPU levels, suggesting plenty of room for upside if Meta can improve targeting and engagement on WhatsApp. Any early signs of traction here in Q2 could shift market sentiment further in Meta’s favor.

CAPEX: Investment or Overreach?

Meta shocked investors in Q1 by raising its 2025 capex guidance to $64–72 billion—almost double 2024 levels. The bulk of that is aimed at AI infrastructure: data centers, chips, and a talent arms race. From a $14 billion investment in Scale AI to reportedly offering $100 million+ compensation packages for top engineers, Meta is betting big.

Whether that spend will translate into long-term revenue is still an open question. Meta’s track record in monetizing new products—Instagram, Stories, Reels—gives it some credibility, but investors are increasingly asking when, not if, the returns will materialize.

Another capex hike in this quarter’s report could raise eyebrows. Markets like commitment to AI, but ballooning costs without a clear monetization path might test investor patience.

Llama, Smart Glasses, and Meta's Hardware Ambitions

Beyond ads and AI, Meta is quietly building an ecosystem. The integration of Llama OS into its Ray-Ban and Oakley smart glasses, developed with eyewear giant EssilorLuxottica, is part of its long-term vision for an AI-powered hardware platform. IDC data shows Meta holds over 50% market share in the head-mounted device space, but losses in Reality Labs continue to mount.

Don’t expect a profit turnaround here soon, but Meta's hardware strategy could eventually mirror Apple’s integrated model—hardware powered by its own OS and AI models.

Regulatory Overhang in Europe

One red flag is Meta’s ongoing tussle with EU regulators over its no-ads subscription model. A ruling against Meta could lead to lower engagement or revenue in Europe. While any impact would likely be felt in Q3 or beyond, it remains a risk factor to watch.

Final Thoughts

Meta has managed to impress the market in recent quarters—beating EPS estimates ten times in a row and delivering an average 17% earnings surprise. But the bar is higher now.

To keep the rally alive, this quarter needs to show not just strong ad performance, but real signs that the WhatsApp monetization and AI investment stories are becoming more than just narratives.