Shares of Meta, owner of Facebook, WhatsApp and Instagram, fell sharply after the company revealed it had raised its cost forecast for the current year.
Investors sent the stock down 10% after hours in New York when MetaFirst-quarter results showed new bills are expected to fund new artificial intelligence (AI) products and the infrastructure behind them.
The company, founded and led by Mark Zuckerberg, said it now expects capital spending in the range of $35 billion to $40 billion for 2024.
This represents an increase from the previous range of $30 billion to $37 billion.
It also raised its forecast for total spending to between $96 billion and $99 billion, an increase of $2 billion at the low end.
These changes, while not of considerable magnitude, nevertheless threaten to reopen old wounds after a 2022 row with investors over Zuckerberg’s bets on technology.
Meta has updated its ad buying products with AI tools and short-form video formats to drive revenue growth, while also introducing AI features like a chat assistant to drive engagement on its social media properties.
Other major key metrics reported by the company exceeded financial market expectations, according to LSEG data.
Total revenue increased 27% to $36.5 billion and Meta expects slight improvement in the current March-June quarter.
However, its low-end amount came in below market expectations and analysts said the company’s sentiment contributed to the stock price sell-off.
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A 10% reduction in share price equates to a $125bn (£100.3bn) loss in market value, they said, as values continued to fluctuate.
The stock remains up about 30% from the previous year.
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Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said of the reaction: “Meta’s substantial investment in AI has the capacity to significantly improve engagement with its platforms, and therefore the amount that marketers are willing to pay for ad space.
“The group has indeed exceeded expectations at a time when uncertainty in digital advertising remains high.
“More than 50 countries are scheduled to have elections this year, which significantly increases uncertainty, and digital spending tends to decline when risks increase.
“This is a testament to Meta’s enormous scale and importance to today’s marketers. Its fortunes are likely also bolstered by The uncertain future of TikTok in the United States. One potential consequence of all this turmoil could well be the addition of TikTok to the Meta family. »
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She added: “For all Meta’s bold plans in AI, it cannot afford to take its eyes off the heart of the company: its core advertising business.
“This doesn’t mean ignoring AI, but it does mean spending should be targeted and aligned with a clear strategic vision.”
