Shares of Meta (META) experienced a 15% drop in after-hours trading following a disappointing outlook for Q2 revenue and plans for aggressive spending in artificial intelligence (AI), while its metaverse division continues to operate at a loss.
Meta’s financial chief, Susan Li, announced during the April 24 first-quarter results that the company’s revenue guidance for Q2 is projected to be between $36.5 billion and $39 billion, falling below Wall Street expectations of $38.3 billion. Additionally, expenses are expected to rise to $96 billion to $99 billion, up from $94 billion to $99 billion, primarily due to increased infrastructure and legal costs.
Li also mentioned an increase in full-year 2024 capital expenditures to a top end of $40 billion, reflecting Meta’s aggressive investment plans to support AI research and product development.
In Q1, Meta posted revenues of $36.46 billion, representing a 27% year-on-year (YOY) increase, surpassing Wall Street analysts’ estimates. Earnings per share doubled YOY to $4.71, beating estimates.
Meta’s metaverse building Reality Labs reported a loss of $3.85 billion in Q1, with expected increased losses year-on-year as the company focuses on product development. CEO Mark Zuckerberg highlighted the integration of Reality Labs with AI efforts, emphasizing a multi-year investment cycle before fully scaling AI businesses.
Meta shares plummeted 15.4% in after-hours trading to $417.22 on April 24, following a day where it closed down 0.5% at $493.50. However, despite this decline, Meta is still up 42.5% year-to-date, reaching an all-time high of $527.34 earlier in April.
On April 18, Meta launched its Llama 3 AI model, integrated into its Meta AI chatbot across Facebook, Instagram, WhatsApp, and Facebook Messenger. Despite some reports of bizarre interactions, Meta claims human evaluators ranked Llama 3 higher than other models, including OpenAI’s ChatGPT-3.5.
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