Meta revenues thrive in Q1, but enhancing value will be key to offset tariff losses

The news: Meta exhibited notable revenue growth in its first quarter, fueled by enhanced advertising monetization strategies and continued growth in its worldwide user community—but tariffs could spell trouble ahead.

By the numbers:

• Revenues: $42.31 billion, up 16% YoY and above analyst expectations.
• Family Daily Active People: 3.43 billion, up 6%.
• Ad impressions: Up 5% YoY across Meta apps.
• Price per ad: Up 10% YoY.
• Costs and expenses: Grew 9% YoY to $24.76 billion.

Meta shares were up 6.8% Thursday morning, demonstrating continued confidence in its ad reach and ability to ward off tariff impacts.

The company also provided guidance for Q2, estimating earnings between $42.5 to $45.5 billion. Full year 2025 and expanding total expenses are expected to fall between $113 to $118 billion, lower than Meta’s previous outlook.

On Meta’s earnings call, CEO Mark Zuckerberg noted that 3.4 billion people use Meta apps daily and highlighted the role that AI is playing in Meta’s growth, despite economic uncertainty.

Looking forward: While Q1 was successful for the social media giant, the ongoing US-China tariff war is expected to hit Meta hard, and its impact will likely be more noteworthy in Q2.

• Major Chinese advertisers including Temu and Shein contribute a substantial portion of ad spending on Meta platforms, accounting for 11% of ad spending in 2024 across Meta apps, amounting to billions of dollars.
• This issue is exacerbated by the elimination of the de minimis exception, which allowed foreign retailers to ship low-cost goods to US consumers. Increased operating costs could cause retailers to compensate by reining in ad spending.

Zuckerberg made clear how the company plans to offset these threats: by building its AI investments.

• Meta’s focus on AI-powered ad targeting and content recommendations is enhancing engagement and monetization across its platforms.
• The company’s AI models have attracted advertisers by enabling precision targeting in ads, boosting revenues per user, increasing click-through rates, and overall making advertising on Meta platforms more effective.

Our take: While Meta saw a successful Q1, tariffs and economic volatility indicate an uncertain future for social media advertising.

• For Meta, the company must show that AI is a significant driver of user retention and revenues. Its current AI investments have positioned it as a leader in AI ad targeting and automation—something the company must emphasize if it wants to attract advertisers and increase revenues despite pullbacks from China and domestically amid economic uncertainty.
• Platform competition could intensify for remaining ad dollars as budgets tighten, making user engagement even more critical. Platforms maintaining strong user growth and larger platforms like Meta with established attribution systems may retain more spend than smaller or emerging platforms still building audiences and measurement infrastructure.
• Innovation and acceleration in alternative revenue streams is crucial. Platforms dependent on traditional display advertising could struggle more than those developing commerce, subscription, and other non-ad revenue channels.

Go further: Read our report on what’s changed in the first 100 days of Trump’s presidency.