Meta Stock Dives 15% on Heavy Artificial Intelligence Investment Plan

Meta's stock took a nosedive of over 15% in after-hours trading following a cautious outlook despite a strong first-quarter performance.

Revenue surged by 27% to $28.65 billion compared to the same quarter last year, marking the fastest growth rate since 2021.

Net income more than doubled to $12.37 billion, driven partly by a 16% reduction in sales and marketing expenses from the previous year.

Meta's second-quarter sales forecast of $36.5 billion to $39 billion fell below analysts' expectations, with the midpoint indicating an 18% year-over-year increase.

CEO Mark Zuckerberg's discussion of investments in areas like glasses and mixed reality, where the company isn't yet profitable, sparked further selling during the earnings call.

Meta has shifted from reporting daily and monthly active users to "family daily active people," which reached 3.24 billion in March 2024, up 7% from the previous year.

Investor expectations have risen due to Meta's recent financial improvements, leading to a stock rally, with shares up around 40% this year following nearly tripling in value last year.

Zuckerberg's focus on efficiency led to job cuts and minimal hiring, with headcount dropping by 10% year-over-year to 69,329 in the first quarter.

Capital expenditures for 2024 are projected to increase to $35 billion to $40 billion to support Meta's AI initiatives, up from a prior estimate of $30 billion to $37 billion.

While Meta's advertising revenue surged 27% to $35.64 billion, its Reality Labs unit, focused on the metaverse, reported $3.85 billion in losses, bringing total losses since 2020 to over $45 billion.