Meta, the parent company of Facebook and Instagram, is gearing up to announce its second-quarter earnings after the bell on Wednesday. The focus is expected to be on the company's AI spending and advertising business performance, with analysts eagerly awaiting to see the returns on Big Tech's investments in technology. In the prior quarter, Meta's CFO raised the company's full-year total expense estimate to between $96 billion and $99 billion. The company is projected to report earnings per share of $4.74 on revenue of $38.3 billion for the second quarter, compared to $2.98 earnings per share and $31.9 billion in revenue during the same period last year. Analysts anticipate Meta's Family of Apps revenue, which includes Facebook, Instagram, WhatsApp, and Messenger, to reach $37.7 billion, up from $31.7 billion in Q2 last year.

Experts predict that Meta is in a position of strength heading into its Q2 earnings report, with continued growth in Reels expected to compete with TikTok's market share. However, questions loom over the monetization potential of Threads in comparison to other platforms. Jefferies analyst Brent Thill remains bullish on Meta's growth, noting healthy ad budgets and strong Meta spend growth. While Meta's advertising revenue is projected to perform well, the lingering question on Wall Street revolves around the investment in AI and when it will deliver substantial revenue returns.

CEO Mark Zuckerberg recently announced Meta's latest open-source large language model, Llama 3.1, emphasizing the company's focus on AI development. The industry is shifting towards open-source AI, with Zuckerberg advocating for this approach over closed-source models like OpenAI's ChatGPT. Expectations for Meta's Reality Labs segment revenue stand at $376 million for the quarter, up from $276 million in the same period last year. However, Reality Labs continues to face challenges, including significant losses and a lack of clear direction.

The earnings report follows Texas Attorney General Ken Paxton's announcement of a $1.4 billion settlement between the state and Meta over the company's alleged misuse of Texans' biometric data for its Tag Suggestions feature. As Meta prepares to unveil its financial results, the focus will be on AI strategies, advertising revenue growth, and the company's ongoing developments.