Meta Reports First-Quarter Earnings: Shares Tumble 17% After AI Investment Plan

Meta reported its first-quarter earnings on Wednesday, revealing plans to invest more in AI. However, shares took a hit, tumbling 17% in after-hours trading.

Strong Revenue, But Light Sales Forecast

Despite reporting revenue and earnings-per-share that surpassed analyst estimates, Meta's shares slid after providing a second-quarter sales range that fell short of expectations. The company also announced intentions to increase spending beyond initial projections for the year.

Shift in Reporting Metrics

Meta's latest report marks the first time the company did not disclose monthly and daily average user numbers specifically for Facebook. Instead, the report encompassed overall results for the "Family of Apps," which includes Instagram and WhatsApp.

Financial Performance Highlights

The combined revenue for the Family of Apps reached $36 billion, surpassing the consensus estimate of $35.5 billion. Despite a 0.5% slip in stock value on Wednesday, Meta had previously seen a robust 39% gain in 2024.

Focus on AI and Partnerships

During the investor call, CEO Mark Zuckerberg emphasized Meta's plans for significant AI investments. He also highlighted the company's recent collaboration with Ray-Ban. However, the stock showed no immediate signs of recovery as the Q&A session concluded.

Increased AI Investment and Forecast Adjustments

Zuckerberg revealed Meta's intentions to boost AI investments substantially, noting that it will take several years to establish a leading AI position. The company expects to expand its investment envelope significantly before generating substantial revenue from these new initiatives.

Updated Financial Projections

Following the call, Meta revised its full-year 2024 capital expenditure forecast to $35-40 billion, up from the previous range of $30-37 billion. The company plans to accelerate infrastructure investments to support its AI roadmap, despite anticipating higher expenses in infrastructure and legal areas.

Analyst Insights and Market Response

Market analysts, including Max Willens from Emarketer, noted that Meta's intensified focus on AI could lead to short-term cost challenges. This shift in guidance contributed to a 10% decline in Meta's stock value after the weak second-quarter revenue forecast.

Positive Outlook from Financial Institutions

Financial institutions like Goldman Sachs, JPMorgan, Wells Fargo, and Bank of America expressed confidence in Meta's long-term prospects, particularly in AI innovation and advertising initiatives. These institutions highlighted Meta's competitive positioning and potential for revenue growth.

Industry Recognition and Target Price

Goldman Sachs rated Meta as a "Buy" with a 12-month price target of $555, emphasizing the platform's advertising potential. JPMorgan and Wells Fargo also provided positive outlooks, underscoring Meta's growth trajectory and product innovation.

RBC Capital and Bank of America further highlighted Meta's leadership in the ad business and the untapped potential of its AI assets. Despite short-term market fluctuations, these institutions maintain an optimistic view on Meta's future performance.

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By: fdemott@insider.com (Filip De Mott,Grace Kay)
Title: Meta Reports First-Quarter Earnings: Shares Tumble 17% After AI Investment Plan
Sourced From: www.businessinsider.com/meta-stock-facebook-quarterly-earnings-call-report-live-updates-2024-4
Published Date: Wed, 24 Apr 2024 22:33:47 +0000