Meta Stock Plunges 13% on Weak Q2 Revenue Outlook & AI Spending Plans

Meta Platforms (NASDAQ:META) shares dropped more than 13% in pre-market today following the company's announcement of weaker revenue guidance for the upcoming quarter and plans to significantly increase annual spending to leverage the artificial intelligence trend. The company set its revenue expectations for the second quarter between $36.5 billion and $39 billion, with a midpoint of $37.75 billion, which is below the anticipated $38.3 billion.

This adjustment in revenue outlook is coupled with an increase in projected full-year 2024 capital expenditures, now expected to range from $35 billion to $40 billion, up from the previously forecasted $30 billion to $37 billion. Last year, Meta's expenditures were $28.1 billion. The company plans to boost infrastructure investments to advance its AI capabilities, aiming to position Meta as a global leader in AI technology. Market reactions were cautious, reflecting concerns that higher spending on AI technologies and infrastructure might negatively impact margins and potentially constrain spending on user acquisition. Analysts from Goldman Sachs noted a potential downtrend in future revenue projections due to these factors, while Stifel analysts questioned the long-term profitability of Meta's AI investments.

Despite these concerns, Meta's performance for the first quarter exceeded expectations, reporting earnings of $4.71 per share on revenues of $36.46 billion. This surpassed predictions and showed an increase in ad pricing across all regions. The company also reported that its family of apps' daily active users reached 3.24 billion in March 2024, marking a 7% year-over-year growth.