With better-than-expected earnings, US after-hours trading saw a decline in the shares of US software company Meta.
The owner of Instagram and Facebook predicted increased expenses this year due to the business’s significant artificial intelligence (AI) investment.
After the company said that it was going to spend billions of dollars more in 2024 than it had previously projected, its shares dropped by more than 15%.
To increase revenue growth, Meta has been using artificial intelligence (AI) features into its ad-buying offerings.
In addition, it has been adding additional AI capabilities, like chat assistants, to its social media platforms.
From an earlier estimate of $30–$37 billion, the company said it now projected to spend between $35 billion and $40 billion (£28 billion–32 billion) in 2024.
Even though its earnings surpassed projections, its shares dropped.
Analysts had projected earnings of $36.16 billion for the first quarter, while revenue climbed 27% to $36.46 billion.
Glancing at Meta’s Q1 Results
From January to March of FY24, Meta’s profit nearly doubled to $12.37 billion, or $4.71 per share, from $5.71 billion, or $2.20 per share, in the same period. In addition, revenue grew by 27% to $36.46 billion from $28.65 billion in the year before.
First Quarter 2024 Financial Highlights
|
Three Months Ended March 31, |
% Change |
||||||
|
In millions, except percentages and per share amounts |
2024 |
2023 |
|||||
|
Revenue |
$ 36,455 |
$ 28,645 |
27 % |
||||
|
Costs and expenses |
22,637 |
21,418 |
6 % |
||||
|
Income from operations |
$ 13,818 |
$ 7,227 |
91 % |
||||
|
Operating margin |
38 % |
25 % |
|||||
|
Provision for income taxes |
$ 1,814 |
$ 1,598 |
14 % |
||||
|
Effective tax rate |
13 % |
22 % |
|||||
|
Net income |
$ 12,369 |
$ 5,709 |
117 % |
||||
|
Diluted earnings per share (EPS) |
$ 4.71 |
$ 2.20 |
114 % |
||||
Statements of Meta accompanying analysts
Hargreaves Lansdown’s lead equities analyst, Sophie Lund-Yates, described the company’s spending intentions as “aggressive”.
According to her, advertisers are willing to spend more money “in a time when digital advertising uncertainty remains rife” because Meta has made a “substantial investment” in AI, which has helped it draw users onto its platforms for longer.
She claimed that elections will take place in more than 50 nations this year, “which hugely increases uncertainty” and may mislead advertisers.
“TikTok’s uncertain future in the US is probably also bolstering Meta’s fortunes,” the speaker continued.
Rival to Meta, it has declared that it will challenge a “unconstitutional” regulation that may lead to TikTok being removed from sale or prohibited in the US.
“Looking further ahead, the biggest risk [for Meta] remains regulatory,” stated Ms. Lund-Yates.
Nonethless, the Q1 had indeed bought turmoil for Meta with the Irish data authorities fining Meta €1.2 billion (£1 billion) last year for improperly managing people’s personal information throughout its migration from Europe to the US.
Additionally, in February of this year, US senators chastised Meta CEO Mark Zuckerberg and forced him to extend an apology to the families of children who had been sexually exploited.
“More than enough resources to throw at legal challenges, but that doesn’t rule out the risks of ups and downs in market sentiment,” Ms. Lund-Yates continued.
