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Yahoo
25 minutes ago
- Yahoo
Meta's earnings blowout has destroyed tech's AI concern: Opening Bid top takeaway
A Big Tech blowout. After strong second quarter earnings reports from Alphabet (GOOG) and Netflix (NFLX), the market was ready to be amazed by Microsoft (MSFT) and Meta (META). What investors got was flat-out noteworthy given the gargantuan size of these beasts. Meta delivered 22% revenue growth to $47.52 billion as AI investments fuel improved ad monetization. On the earnings call, co-founder and CEO Mark Zuckerberg sounded like an AI overlord, hyping up his recent hiring of Alexandr Wang to build out a superintelligence unit. No matter that Meta guided to a roughly $30 billion year-over-year increase in capital expenditures this year! "Meta's 2Q results reinforced that AI is driving positive impacts on engagement and advertising, which enables Meta to invest more in AI capacity," KeyBanc analyst Justin Patterson wrote. Microsoft was no slouch. The company's Azure business sales accelerated, which has analysts foaming at the mouth. Guidance looked solid too. Guggenheim analyst John DiFucci noted, "Nights like this make us wonder why we couldn't get there with Microsoft when it was below $400 [a share], but frankly, we didn't see this coming, though in fairness to Microsoft management, they said it was." Lost in the robust tech reports is Federal Reserve chair Jay Powell sounding more like a hawk than a dove at his presser Wednesday afternoon. And an honorable mention is the 27% surge in Wingstop's (WING) stock on Wednesday after strong earnings (watch the CEO on Opening Bid above). Although it's an embarrassment of riches for investors today in terms of catalysts, it's Meta that deserves a zoom-in. Zoom-in: Meta wows Zuckerberg delivered, and then some. On top of the 22% sales increase, the company signaled the good times will keep on rolling as it plows deeper into artificial intelligence. Perhaps more important than the sales increase is that operating profit margins rose despite mega-spending on AI projects. Meta's quarterly scorecard: Wins: The core advertising model is on fire. AI investments are clearly paying off. Zuckerberg is as engaged as ever. Losses: Super lofty guidance for 2026 capex spending. What analysts are saying: "In addition to bringing tools for advertisers to better reach clients, AI can also be a source of currently unpriced revenue streams at WhatsApp (only a few regions use these messaging apps to engage with customers), including with Agentic AI. Also, with Meta AI (accessible from WhatsApp or via a standalone app in the US, for example), Meta could capture more search related traffic and open new ad opportunities. Were WhatsApp standalone to attract the same ad/services dollars as Facebook or Instagram, and assuming 10% cannibalisation rate, we calculate a $50 billion revenue opportunity in 2030." -HSBC's Neil Churchill "Meta's 2Q results reinforced that AI is driving positive impacts on engagement and advertising, which enables Meta to invest more in AI capacity. The difference today we see vs. 2022's over-spending concerns is: 1) core revenue growth is healthy; 2) the relationship between capex and AI are clear; 3) medium-term growth drivers are clear (e.g., Business messaging, Meta AI, glasses); and 4) tax policy is supportive of capex investment." -KeyBanc's Justin Patterson "In our view Meta has a solid chance of being a leader in AI by taking advantage of its heavy investment in equipment/talent, existing relationship with ~3.4 billion users, large amounts of data and the decision to go (mostly) open-source ... Importantly, even if Llama does not become a significant standalone revenue generating business for Meta it still is likely to put them in a position to accumulate a massive amount of additional data to improve their AI." -Pivotal Research's Jeff Wlodarczak The bottom line: We've heard for the better part of a year that aggressive AI spending by tech companies would hammer their profits and then their stocks. That thesis is proving wrong. Just look at the results from Microsoft and Meta! AI investments are fueling their top and bottom Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
25 minutes ago
- Yahoo
Should You Buy Into the Post-Earnings Rally in Meta Platforms Stock?
Meta Platforms (META) shares soared more than 12% on Thursday after the tech titan reported its second-quarter financial results that topped Street estimates across the board. Investors are cheering META shares this morning also because management guided for at least $47.5 billion in revenue in the current quarter, also well above the $46.14 billion expected. More News from Barchart Morgan Stanley Says Nvidia Has 'Exceptional' Strength. Should You Buy NVDA Stock Here? Dear MicroStrategy Stock Fans, Mark Your Calendars for July 31 2 Growth Stocks Wall Street Predicts Will Soar 74% to 159% Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. Including the post-earnings rally, Meta stock is up some 62% versus its year-to-date low set in April. Q2 Earnings Brought in Many Positives for Meta Stock Meta's strong Q2 financials reflect how significantly its artificial intelligence (AI) investments are making its core business, advertising, more efficient than ever before. In the second quarter, the tech behemoth generated $46.56 billion in revenue from ads, handily beating consensus estimates at $43.97 billion. META shares are rallying today also because daily active people across the company's family of apps went up by another 50 million (sequentially) while Reality Labs, its metaverse-focused unit lost a less-than-expected $4.53 billion in Q2. Note that Meta Platforms' earnings release arrives only a day after CEO Mark Zuckerberg said developing superintelligence was now 'in sight.' Is There Any Further Upside Left in META Shares? While META stock has already experienced a substantial rally in recent months, Bank of America analyst Justin Post continues to see it as the best AI pick with significant further upside. In a post-earnings research note, Post raised his price objective on the company to $900 as 'a growing list of new ad capabilities reinforces our confidence in the strength of Meta's AI ad engine.' According to the analyst, management's upbeat third-quarter guidance suggests their AI investments are bearing fruits. All in all, the BofA analyst recommends owning Meta shares here as the company is 'well-positioned to lead in an emerging agentic AI ecosystem.' Catalysts for the second half of 2025 include growing usage, and ads on Threads and WhatsApp, he concluded. Meta Platforms Is Not an Expensive Stock to Own Despite a meteoric rally since April, Meta stock is going for a forward price-earnings multiple of about 27x at the time of writing, which isn't particularly expensive for a top AI name. That's why Wall Street analysts are sticking to their consensus 'Strong Buy' rating on META shares for the back half of this year. On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Sign in to access your portfolio
Yahoo
25 minutes ago
- Yahoo
Applied Digital (APLD) Reports US$233M Net Loss Despite Revenue Growth
Applied Digital reported strong quarterly sales growth to USD 38 million, yet still recorded a net loss of USD 53 million, albeit improved from the previous year. Concurrently, the company's stock price surged 89% in the last quarter—a remarkable rise coinciding with major partnerships cemented with BASX and ABB for energy-efficient AI infrastructure innovations, and a significant leasing deal with CoreWeave potentially worth USD 7 billion. These developments bolstered investor confidence amidst an optimistic market backdrop where tech stocks have generally thrived, buoyed by strong earnings from industry giants like Microsoft and Meta. We've spotted 2 risks for Applied Digital you should be aware of, and 1 of them can't be ignored. Uncover the next big thing with financially sound penny stocks that balance risk and reward. The recent strategic shifts and partnerships discussed in the introduction are poised to significantly propel Applied Digital's narrative forward. The collaboration with BASX and ABB, along with the leasing deal with CoreWeave, is likely to strengthen the company's position in the AI infrastructure sector, potentially translating into increased revenue streams. These advancements might catalyze improvements in earnings forecasts, given the anticipated boost from the outlined capital investments and strategic business model transitions. Such developments are often sufficient to attract investor interest and reinforce both market confidence and stock valuations. Over the past five years, Applied Digital's shares have experienced a very large total return of 8258.40%, a remarkable increase highlighting strong shareholder value creation over this duration. In comparison, the company's performance outpaced the US IT industry over the past year. While the broader industry saw a more modest return, Applied Digital's share price movements, in the last quarter alone, reflected a significant surge complementing its longer-term ascent. The stock's 89% quarterly surge, aligned with analyst projections of a future price target of US$14.61, suggests a bullish outlook, but it's crucial to note the current share price of US$10.03 results in a notable discount to this target. This gap may underscore both potential growth opportunities and underlying risks that investors might weigh, particularly in light of the company's current high price-to-sales ratios compared to peers and the industry. As revenue and earning prospects evolve through continued execution of growth strategies, investor sentiment will likely remain closely tied to how well these initiatives materialize economically. The analysis detailed in our Applied Digital valuation report hints at an inflated share price compared to its estimated value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include APLD. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
