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Meta Platforms (META), the parent company of Facebook, Instagram, WhatsApp, Oculus, Threads, and other brands, is scheduled to report second-quarter results after market close on Wednesday, July 26 with a conference call scheduled for 5 pm ET. Here's what to watch for: 

EXPECTATIONS: Last quarter, Meta Platforms reported earnings of $2.20 per share on revenue of $28.65B.

Meta noted that in March it announced three rounds of planned layoffs to further reduce its company size by approximately 10,000 employees across the Family of Apps and Reality Labs segments. "In connection with these layoffs, we expect to incur total pre-tax severance and related personnel costs of approximately $1B, of which $523M was recognized during the first quarter of 2023 and the remaining charges will be substantially recorded by the end of 2023...Excluding these charges, our operating margin would have been four percentage points higher and our diluted EPS would have been 44c higher for the first quarter of 2023," Meta stated.

Mark Zuckerberg, Meta founder and CEO, said at the time: "We had a good quarter and our community continues to grow. Our AI work is driving good results across our apps and business. We're also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision."

The company said at that time that it expected second quarter revenue to be in a range of $29.5B-$32B, versus the then-current consensus of $29.48B.

Meta added: "In 2022, we initiated several measures to pursue greater efficiency and to realign our business and strategic priorities. As of March 31, 2023, we have substantially completed the 2022 employee layoffs while continuing to assess facilities consolidation and data center restructuring initiatives."

Current consensus EPS and revenue forecasts for Meta's June-end quarter stand at $2.89 and $31.06B, respectively, according to data from Bloomberg.

THREADS: On July 6, Meta CEO Mark Zuckerberg said Threads surpassed 10M signups within seven hours of launch. On July 7, Zuckerberg posted an update that stated: "70 million sign ups on Threads as of this morning. Way beyond our expectations."

After the company released Threads, Citi analysts reiterated a Buy rating on Meta Platforms with a $360 price target stating that they were "impressed" with the ramping adoption of the app given Instagram integration and that they envision the product becoming a key part of Meta's engagement strategy over time. Threads is most comparable to Twitter and fills a space in Meta's product strategy for public conversations with a focus on a more "friendly" environment across topics, the analyst told investors. Citi also believes Threads creates a generative artificial intelligence opportunity to further train Meta's large language models.

Rosenblatt, meanwhile, raised the firm's price target on Meta Platforms to $333 from $263 and kept a Buy rating on the shares. The firm, which says Meta's new Threads "looks sharp to us, both in the direct opportunity, AND in the return of swagger to Meta's social media wheelhouse," raised its long-term estimates and multiple, driving the higher price target.

On July 13, Meghan Bobrowksy and Lindsey Choo of The Wall Street Journal reported that Meta's social media app Threads hit 100M users in five days after its launch. However, the platform has to prove it can persuade users to stay. Currently, Twitter and Threads look and function similar to one another, but Meta has made some initial efforts to differentiate the apps, the Journal added.

The same day, TD Cowen upgraded Meta Platforms to Outperform from Market Perform with a price target of $345, up from $220. The firm, which raised its 2023-2028 estimates following positive Q2 advertising market checks, thinks consensus estimates are likely too low given potential monetization upside from Reels, Threads monetization optionality and the potential for more cost cuts.

LARGE LLAMA: On July 18, John Montgomery, Microsoft's (MSFT) Corporate Vice President, Azure AI, stated in a blog post: "Today, at Microsoft Inspire, Meta and Microsoft announced support for the Llama 2 family of large language models - LLMs - on Azure and Windows. Llama 2 is designed to enable developers and organizations to build generative AI-powered tools and experiences. Meta and Microsoft share a commitment to democratizing AI and its benefits and we are excited that Meta is taking an open approach with Llama 2. We offer developers choice in the types of models they build on, supporting open and frontier models, and are thrilled to be Meta's preferred partner as they release their new version of Llama 2 to commercial customers for the first time. Now Azure customers can fine-tune and deploy the 7B, 13B, and 70B-parameter Llama 2 models easily and more safely on Azure, the platform for the most widely adopted frontier and open models... Meta and Microsoft have been longtime partners on AI, starting with a collaboration to integrate ONNX Runtime with PyTorch to create a great developer experience for PyTorch on Azure, and Meta's choice of Azure as a strategic cloud provider. Today's announcement builds on our partnership to accelerate innovation in the era of AI and further extends Microsoft's open model ecosystem and position as the world's supercomputing platform for AI."

On July 26, Reuters' Josh Ye reported that Alibaba (BABA) plans to let business customers use Meta's Llama 2 to build apps, making it the first Chinese company to do so. Meta released Llama 2, a commercial version of Llama, this month and said its preferred partner for Llama 2 was Microsoft, but that it would also be available through other partners, the report noted.

STREET MORE BULLISH: On July 25, shares of Meta Platforms moved higher after New Street upgraded its rating on the name to Buy from Neutral with an increased price target of $350. The upgrade follows Meta's release of Llama 2 and the firm "hearing very positive feedback" on the company's artificial intelligence efforts. Last week's launch of Llama 2 should help continue Meta's valuation expansion momentum, New Street told investors in a research note. In addition, with the stock down 8% over the past three trading sessions, Meta's upcoming Q2 results on Wednesday "are (somewhat) de risked," the firm wrote. It expects the continued ramp of Reels and growing advertiser adoption of its Advantage suite of ad products to drive outperformance relative to the digital advertising market over the near term.

On July 26, Evercore ISI raised the firm's price target on Alphabet (GOOGL) to $160 from $130 and kept an Outperform rating on the shares in the wake of better-than-expected Q2 results. The firm views Alphabet's ad revenue results as "neutral-to-modestly-positive" for other internet advertising stocks, including Meta, the analyst tells investors. In addition, Evercore says that based on Alphabet management commentary and Microsoft results that it is "more convinced that the $30B Capex Club" of Amazon's (AMZN) AWS, Google, Meta and Microsoft "will become the $40B Capex Club."

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