Meta (META) reported its first quarter earnings on Wednesday, and while it beat analysts’ expectations on the top and bottom lines, a disappointing Q2 forecast sent shares of the social media giant plummeting almost 13% in pre-market trading Thursday.
Meta says it will see second quarter revenue between $36.5 billion and $39 billion, falling short of midpoint estimates of $38.24 billion.
In addition to the downbeat Q2 forecast, Meta CFO Susan Li raised the company’s full-year total expenses estimate from a range between $94 billion-$99 billion to between $96 billion-$99 billion due to higher infrastructure and legal costs.
On the company’s earnings call, CEO Mark Zuckerberg said, “As we’re scaling capex and energy expenses for AI, we’ll continue focusing on operating the rest of our company efficiently. But realistically, even with shifting many of our existing resources to focus on AI, we’ll still grow our investment envelope meaningfully before we make much revenue from some of these new products.”
Li said Meta also continues to expect its Reality Labs division to report increased year-over-year operating losses as the company builds out its various AI, AR, and VR efforts.
“While we are not providing guidance for years beyond 2024, we expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts,” Li said in a release.
Meta reported earnings per share of $4.71 in the quarter on revenue of $36.46 billion. Wall Street was anticipating EPS of $4.30 on revenue of $36.12 billion, according to analysts’ estimates compiled by Bloomberg.
Meta stock had been on a tear, climbing 131% over the last 12 months and more than 39% year to date. That’s far better than chief rival Google (GOOG, GOOGL) which is up 50% in the last 12 months and 13% year to date.
While part of Meta’s stock performance has to do with a recovery in the digital advertising market, the company’s stock price also rocketed higher last quarter after the social media company announced it was initiating a $0.50 per share dividend and increased its stock buyback authorization by $50 billion.
The company did not announce any updates to its shareholder return initiatives on Wednesday.
Meta has made a series of announcements regarding its AI efforts in recent months, including debuting its Meta AI chatbot and Llama 3 large language model on April 18.
The chatbot, however, has already garnered controversy after it joined a private Facebook group for mothers in Manhattan and claimed to have a child of its own, 404 Media reported.
On the metaverse front, CEO Mark Zuckerberg announced on Monday that Meta will make its Horizon operating system for headsets open source, allowing third-party companies like Lenovo and Microsoft to use it to build their own devices using the software. The idea is to bring more headsets to market while increasing Meta’s reach in the AR/VR space.
The company also stands to benefit significantly if Congress’s TikTok ban, which President Biden signed into law on Wednesday, survives legal challenges. If the app is locked out of the US, it stands to reason that users and creators would turn to rival platforms like Instagram to scratch their social media itches.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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