Meta’s shares slide 15% following a bleak forecast and increased spending on AI and the metaverse
Meta’s shares took a hit following a disappointing second-quarter revenue forecast and a bold plan to allocate nearly $100 billion this year toward aggressive investments in its AI endeavors.
After-hours trading saw Meta (META) shares plummet by 15% in response to a lackluster Q2 revenue outlook and the company’s intentions to significantly increase spending on artificial intelligence (AI) initiatives. Concurrently, the metaverse segment is anticipated to sustain losses.
During the announcement of its Q1 results on April 24, Meta’s CFO, Susan Li, disclosed that Q2 revenue guidance ranged from $36.5 billion to $39 billion, falling short of Wall Street’s projections of $38.3 billion. Li also indicated an expected rise in expenses to $96 billion to $99 billion, primarily attributed to escalated infrastructure and legal costs. Furthermore, the company raised its 2024 capital expenditure estimate to a maximum of $40 billion, up from the previous $37 billion, to fuel aggressive investments in AI research and product development.
Despite an impressive 27% year-on-year (YOY) revenue surge to $36.46 billion in Q1, exceeding analysts’ estimates by 0.48%, Meta saw its earnings per share double YOY to $4.71, surpassing predictions of $4.32 per share.
The Reality Labs division, responsible for building the metaverse, incurred a loss of $3.85 billion in Q1, with anticipated increased losses YOY as Meta channels funds into product development.
CEO Mark Zuckerberg highlighted the company’s focus on AI during an earnings call, acknowledging the extensive time frame required to achieve leadership in this field. Meta shares experienced a significant decline of 15.4% on April 24, closing at $417.22, following a day where they ended down 0.5% at $493.50, according to Google Finance. Despite this setback, Meta has seen a year-to-date increase of 42.5%, reaching an all-time high of $527.34 on April 5.
On April 18, Meta unveiled its Llama 3 AI model integrated into its Meta AI chatbot, accessible across Facebook, Instagram, WhatsApp, and Facebook Messenger. Notably, the Meta AI chatbot has garnered attention for its peculiar interactions, including communicating with a Facebook group for New York mothers, claiming to have a child.
