Meta Platforms stock price fall by 15% in extended trade after the company disappointed investors with forecasts of higher expenses and lighter-than-expected revenue. Meta loses $200 billion in value as Zuckerberg focuses earnings call on all the ways company bleeds cash.
Mark Zuckerberg started Meta’s earnings call by talking about AI (artificial intelligence). He also talked about metaverse, touting his company’s headsets, glasses and operating system. Meta AI expenses is almost the entirety of Zuckerberg’s opening remarks focused on the many ways the company loses money.
Meta stock fall
Investors weren’t into it. Meta shares price tumbled as much as 19% in extended trading on Wednesday, wiping out more than $200 billion in market cap. The fall in Meta stock 0came despite Meta reporting better-than-expected profit and revenue for the first quarter.
This was Meta shares’ second highest one-day loss in stock value after the $232 billion loss suffered on February 3, 2022, which was the record one-day loss of market capitalization for any U.S. company.
Zuckerberg appeared ready for the sell-off.
“I think it’s worth calling that out, that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” Zuckerberg said. He cited past efforts like short-video service Reels, Stories and the transition to mobile.
Meta revenue
The Facebook and Instagram parent Meta expects its April-June revenue in the range of $36.5 billion-$39 billion, with a midpoint of $37.8 billion, lower than analysts’ estimates of $38.3 billion, according to LSEG data, Reuters reported.
Meta raised its forecast for expenses this year to support investments in new AI products and the computing infrastructure needed to support them. The company said that the expected spending would continue to increase next year.
Meta raised its 2024 total expense forecast to $96 billion – $99 billion, from $94 billion – $99 billion. It also expects 2024 capital expenditure to fall within a range of $30 billion – $40 billion, up from its earlier forecast of $35 billion – $37 billion, the Reuters report said.
Meta digital advertising
Meta generates 98% of its revenue from digital advertising. But to the extent Zuckerberg talked about ads, he was looking to the future and the ways the company could potentially turn its current investments into ad dollars. In discussing Meta’s effort to build a “leading AI,” by scaling business messaging, introducing ads or paid content into AI interactions.
Meta’s Reality Labs unit, which houses the company’s hardware and software for development of the nascent metaverse, continues to bleed cash. Reality Labs reported sales of $440 million for the first quarter and $3.85 billion in losses. The division’s cumulative losses since the end of 2020 have topped $45 billion.
Zuckerberg has bought himself some time.
Meta market value
Meta’s stock price almost tripled last year and, as of Wednesday’s close, was up 40% in 2024. It reached a record $527.34 in early April.
After a brutal 2022, during which the company lost about two-thirds of its value, Zuckerberg appears to have regained the confidence of Wall Street.
Meta financial outlook
The driver for the rally has been a cost-cutting plan that the Meta CEO put in place early last year. On Wednesday, Zuckerberg said that Meta will continue to operate efficiently, but that shifting existing resources to investments in AI will “grow our investment envelope meaningfully.”
Zuckerberg said he expects to see a “multiyear investment cycle” before Meta’s AI products will scale into profitable services, but noted that the company has a “strong track record” in that department.
Meta finance chief Susan Li echoed Zuckerberg’s remarks, saying the company needs to develop advanced models and scale products before they will drive meaningful revenue.
Even before the call began, investors were trimming their holdings. That’s because Meta issued a light revenue forecast for the second quarter, overshadowing the first-quarter beat.
As Meta stock fall intensified, Zuckerberg told investors that if they’re willing to come along for the ride, they may well be rewarded.
