Meta shares fell late Wednesday as Facebook parent company’s first-quarter results appeared to fall short of high expectations. While the company beat consensus expectations in both revenue and profit, Metaplatforms (META) executives gave lower-than-expected revenue guidance for the current quarter.
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Meanwhile, Meta’s push to become a leader in generative artificial intelligence is increasing costs. The Menlo Park, California-based company raised its total cost forecast, citing infrastructure investments needed to support its “AI roadmap,” according to the company’s press release. All of this contributed to a more than 16% decline in recent after-hours stock market moves today.
The harsh reaction comes even though Meta cleared a high bar with its first-quarter results. The company said in a news release that it earned $4.71 per share on revenue of $36.46 billion in the March-ended quarter. According to FactSet, analysts forecast that Meta would earn $4.32 per share on revenue of $36.14 billion. Revenue rose 27% year over year, while profits rose 114%.
Meta guide for Q2 2024
The negative reaction to Meta stock could be due to current quarter forecasts. Meta forecast revenue between $36.5 billion and $39 billion, or $37.75 billion at the midpoint of its range. That was down from end-June sales of $38.25 billion quarter that analysts had forecast, according to FactSet.
The midpoint of the range would represent annual sales growth of approximately 18% for Meta’s second quarter, compared to sales growth of 27%, 24.7% and 23.2% in Meta’s previous three quarters. However, analysts expected Meta’s growth rate to slow this year as the company struggled with tougher year-over-year comparisons.
But the rising costs may have surprised some investors.
Meta now forecasts capital spending between $35 billion and $40 billion this year, up from the company’s previous range of $30 billion to $37 billion. Meta expects total costs for the year to fall between $96 billion and $99 billion, up from the previously reported range of $94 billion to $99 billion.
In a note to clients Wednesday, Jefferies analyst Brent Thill wrote that “weaker-than-expected second-quarter revenue guidance and increases in overall expense and capital expenditure forecasts could weigh on the stock.”
In a call with analysts on Wednesday, Chief Executive Mark Zuckerberg emphasized that the company released updates to its Meta.ai chatbot and large language model Llama last week.
“I view the results our teams have achieved here as another important milestone that shows we have the talent, data and ability to scale the infrastructure to support the world’s leading AI models and services to build,” said Zuckerberg. “And that makes me believe that we should invest significantly more in the coming years to develop even more advanced models and the largest AI services in the world.”
futures fall; Meta dives and leads 5 key revenue drivers
Meta Stock: Technical Reviews
Before the results were released, Meta fell half a percent to close at 493.50 in Wednesday trading. Before the after-hours plunge, shares had gained nearly 40% and 138% this year. during the last 12 months. Meta shares lagged behind in terms of earnings Nvidia (NVDA) for the best performance in 2024 among the “Magnificent Seven” stocks that contributed to the stock market rally in 2023.
At the time of the report’s publication, Meta stock had a perfect IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Additionally, Meta’s IBD Relative Strength Rating was 96 from 99.
Meta stocks appear on several IBD stock lists, including Tech Leaders, IBD 50, Big Cap 20, and the Premium IBD Leaderboard.
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