What happened

Investors in Meta Platforms (META 0.08%) were in the red on Thursday. Shares of the social media giant were down 4% by 3 p.m. ET today, compared to a 0.7% drop in the S&P 500. Yet the stock is still absolutely trouncing the market so far in 2023, up 153% while the wider market is 18% higher.

The tech-heavy Nasdaq Composite Index was down nearly 3% by early afternoon, likely pressuring Meta's stock. But Thursday's decline also came as investors became more cautious about earnings season, including Meta's report that is set to arrive in just a few days.

So what

It wasn't a great start to earnings season for a few popular growth stocks. Tesla shares were down 9% following its second-quarter announcement. And Netflix stock fell by about the same amount Thursday after the company said its new advertising business would take a while before it begins having a material impact on sales.

Meta relies heavily on digital advertising revenue, and last quarter's 17% drop in prices for these products helped push overall sales growth down to just 3%.

Investors are expecting better results when Meta announces its second-quarter figures after the market closes on Wednesday, July 26. Sales growth should speed up to about 8%, according to the average Wall Street pro. Earnings are projected to improve to $2.91 per share compared to $2.46 a year ago, partly thanks to aggressive cost cuts enacted over the past year. Still, jitters among other large tech stocks, most of which have rallied in 2023, are sure to impact Meta's stock, too.

Now what

The real test for the stock will arrive with that late-July earnings announcement, which will feature updates on key metrics like user growth. Monthly active users expanded by 5% last quarter compared to 4% in the previous quarter. Cost growth has been slowing for several quarters due to layoffs and a wider restructuring process as well. Look for these changes to potentially begin lifting Meta's operating profit margin in the second half of the fiscal year.

Investors next week will be focused on the updated outlook from CEO Mark Zuckerberg and his team. Assuming no big change in their broader projections of modest but accelerating growth and slowing expense spending, Meta will remain on track to generate solid earnings this year. But the growth stock might remain volatile until investors receive that clarity around its own business trends.