Last week Google confirmed the overall ad market is healthy, growing at 8.5% y/y, slightly ahead of the Street’s 7.8%. The catch is that this does not factor in the China impact, as I estimate only about 2% of Google’s ad revenue comes from Chinese sellers (Temu, AliExpress, SHEIN), compared to roughly 10% for Meta.

Zuckerberg will likely keep the tariff comments high-level on the call. I expect language like “we would expect trade uncertainty to impact how Chinese sellers spend on Meta.”

It’s reasonable to expect these sellers will reduce spending by a third this year. Making that adjustment implies the Street’s CY25 estimates go from 13% y/y growth to 8%. As a point of reference, this 8% would be in line with what the Street is currently looking for Google ad growth this year.

I believe this is partially priced into shares.

As for earnings, I’m in the consensus camp that while revenue this year will come in below expectations, earnings will likely be in line with expectations given they have the earnings gift that can keep giving, which is cutting spending on Reality Labs.

If they cut Reality Labs spending by 12% (savings of $2.4B), that would offset the loss of China sellers cutting spending by a third (loss of $5.5B in revenue and $2.5B in operating income).

I’m not expecting much new on the AI front compared to last quarter. The message will likely echo December’s in that Zuckerberg remains a strong believer in AI’s potential to transform the tools used by both advertisers and content creators.

The substance of the AI shift will come through comments suggesting that these additions will contribute incrementally to the companies’ growth over the next several years.

The challenge for investors is that no single segment will clearly emerge as the AI growth driver. Instead, growth will come from a combination of segments working together.

After Deepseek hit the scene in late January, investors grew concerned that the AI investment gravy train powered by the hyperscalers might soon derail. In fact, the opposite occurred following December earnings, reported in early February, when the “faithful four” (Meta, Microsoft, Google, and Amazon) collectively raised their 2025 Capex outlook from 20% year-over-year growth to 40%.

More recently, we’ve heard from Google (earnings), Microsoft (public comment), and Amazon (public comment) that their Capex spending outlook for this year remains unchanged from early February—up about 40%.

I fully expect Meta to stand behind its $60–$65B spending target, which would imply an annual increase of 53-66%.

I expect Meta to remain confident in AI, and for AI investors, the good news is that build-out spending is continuing. This trend of sustained investment also echoed throughout the Deepwater AI Summit we hosted last week.

The facts are clear: 62% of the world’s daily online users visit a Meta property each day. The 3.4B Family Daily Active People (DAP) has grown at a steady 4% year-over-year for each of the past three quarters. The Street expects that to slow to 3% this year.

Any number above 3% in March will remind investors that Meta has a reliable, ‘sleep-well-at-night’ moat.

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