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Meta plunges 16% on weak revenue guidance even as first-quarter results top estimates

Meta shares fell 16% in extended trading on Wednesday after the business published a modest forecast, despite better-than-expected first-quarter results.

Here are the essential figures:

Earnings per share: $4.71 vs. $4.32 projected by LSEG. Revenue: $36.46 billion vs. $36.16 billion expected by LSEG. Revenue climbed by 27% from $28.65 billion in the same period a year ago, the highest pace of rise since 2021. Net income more than doubled to $12.37 billion, or $4.71 per share, from $5.71 billion, or $2.20 per share, last year.

One reason for the increase in net income is that, while revenue growth accelerated, sales and marketing costs fell 16% from the year before.

Meta anticipates second-quarter revenues of $36.5 billion to $39 billion. The midpoint of the range, $37.75 billion, would indicate 18% year-over-year increase and is lower than analysts’ average forecast of $38.3 billion.

The stock sell-off accelerated early in the earnings call after CEO Mark Zuckerberg began discussing investments, specifically in areas like as glasses and mixed reality, where the firm does not currently make money. And he stated that investments in artificial intelligence are expanding.

“On the upside, once our new AI services reach scale, we have a strong track record of monetizing them effectively,” said Facebook CEO Mark Zuckerberg.

The Facebook parent no longer reports daily and monthly active users. It now publishes a figure for “family daily active people.” That figure reached 3.24 billion in March 2024, up 7% from the previous year.

Meta has raised investor expectations as a result of its improving financial performance in previous quarters, leaving little margin for mistake. As of Wednesday’s close, the stock was up around 40% this year, after nearly tripling the previous year. In February 2023, Zuckerberg promised investors that it would be the “year of efficiency,” which sparked the boom.

At the time, Zuckerberg stated that the firm will improve its ability to eliminate needless initiatives and reduce bloat, allowing Meta to become a “stronger and more nimble organization.” The business eliminated over 21,000 people in the first half of 2023, and Zuckerberg stated in February of this year that hiring would be “relatively minimal compared to what we would have done historically.”

In the first quarter, headcount fell by 10% from the previous year, to 69,329.

Capital expenditures for 2024 are expected to be between $35 billion and $40 billion, up from a previous prediction of $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta stated.

The company reported that the average revenue per user in the quarter was $11.20.

Meta has started regaining digital ad market share after a disappointing 2022. In the aftermath of Apple’s iOS privacy upgrade and macroeconomic concerns, numerous brands reduced investment.

Zuckerberg led a drive to restructure the advertising industry with an emphasis on AI. During the company’s last earnings call in February, finance director Susan Li stated that Meta has been investing in AI models that can properly anticipate relevant advertising for viewers, as well as tools that automate the ad-creation process.

Advertising revenue, which accounts for the vast bulk of Meta’s revenue, increased 27% in the first quarter to $35.64 billion.

Meta is profiting from a stabilized economy and increased expenditure by Chinese cheap shops such as Temu and Shein, which have been investing in Facebook and Instagram to attract a larger audience. Some analysts have warned that reduced spending by Chinese advertising may be a source of concern in the first quarter and throughout the year.

Li stated on Wednesday’s results call that the business is not measuring China’s contribution in the quarter, but she did say that advertising revenue in the Asia-Pacific area climbed 41% from the previous year, making it the fastest growing region, and was driven by online shopping and gaming.

The company’s Reality Labs unit, which houses hardware and software for developing the embryonic metaverse, continues to lose money. Reality Labs announced quarterly sales of $440 million and losses of $3.85 billion, bringing total losses since the end of 2020 to more than $45 billion. Analysts predicted an operating loss of $4.31 billion for the quarter.



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