Shares of Meta Platforms are up more than 6% in morning trading following the release of solid Q1 financials. Despite concerns about the expected slowdown in the economy, the social media giant’s underlying business is proving resilient, reflected through its solid ad revenue growth and increasing user engagement across its social media platforms.

One of the biggest highlights of Meta’s Q1 earnings call has been its aggressive push into artificial intelligence (AI). Meta’s AI-driven improvements are reshaping user experiences across its ecosystem. From personalized feed recommendations to dynamic video suggestions, AI keeps users engaged longer. Recent AI-powered upgrades to Meta’s recommendation algorithms have increased the average time spent on its social apps. These gains matter. More time spent on the platform translates into more opportunities for Meta to show ads, and that’s where the monetization happens.

Thanks to these efforts, Meta is witnessing a growing user base and expanding advertising business. The company reported an average of 3.43 billion Family daily active people (DAP) in Q1 2025, reflecting a 5.9% increase year-over-year.

Speaking of revenues, advertising remains the core engine of Meta’s business. In the first quarter of 2025, the company posted $41.4 billion in ad revenue, representing a 16% year-over-year increase. This growth results from more users and its ability to command higher pricing. Notably, the average price per ad increased by 10% in Q1, reflecting that advertisers are willing to pay more for placements on Meta’s platforms, and that's a sign of the effectiveness of its ecosystem.

Thanks to its growing revenues, Meta’s average revenue per person (ARPP) was $12.36, a notable jump of 10.4% year-over-year.

AI to Accelerate Meta’s Growth

With continued strength in these areas, the outlook for 2025 remains optimistic. Meta Platforms continues to show resilience, with its core growth ad business firing on all cylinders. Daily active users across its platforms will continue to expand as Meta leverages AI to drive user engagement, leading to new monetization opportunities.

Meta is also preparing for the next phase of its AI strategy with its new personal assistant, Meta AI. Still, in its early stages, Meta AI is already gaining traction among users, and the company has big plans for it. Once the platform reaches scale, the company envisions monetizing Meta AI through product recommendations, advertising, and even premium subscriptions that unlock advanced features. In essence, Meta AI could become a high-margin revenue driver over the long term, bolstering the company’s solid financial foundation.

Meanwhile, video content is becoming increasingly central to Meta’s growth. Video consumption is rising on Instagram and Facebook. Meta’s pivot toward video, supported by AI-driven discovery and curation, resonates strongly with users, and advertisers will likely follow the eyeballs.

Meta’s internal ad technologies are also evolving with AI. The company rolled out a new Generative Ads Recommendation model to improve ad performance. Early results have been promising, showing improvements in ad conversions. Additionally, Meta’s Advantage+ suite of AI-driven ad tools continues to gain traction, reflecting strong momentum on the product side.

Meta Lifts AI Capex

Meta is spending more to support this AI-driven growth. The company raised its capital expenditures (capex) forecast for 2025 to between $64 billion and $72 billion, up from a previous range of $60 billion to $65 billion. This increase is largely tied to expanded data center investments and the rising costs associated with AI hardware. These expenditures reflect Meta’s commitment to staying at the forefront of the AI revolution and ensuring its platforms are equipped to handle the demands of increasingly sophisticated algorithms.

Bottom Line

Wall Street remains bullish about Meta’s prospects and maintains a “Strong Buy” consensus rating on the stock.

Meta appears well-equipped to navigate a challenging macroeconomic landscape. Its advertising business remains resilient, supported by healthy demand. At the same time, the company’s heavy investments in AI have started to pay off and are opening up new monetization avenues, such as Meta AI. Taken together, these factors suggest Meta has significant upside potential and could skyrocket from current levels.