Meta Stock, the social media giant, reported strong first-quarter profits, surpassing analysts’ expectations. However, the company’s poor second-quarter projection caused its shares to plummet by over 15%. Meta Stock expects its second-quarter revenue to be between $36.5 billion and $39 billion, which is below the consensus forecast of $38.24 billion.
In addition to the disappointing Q2 forecast, Meta CFO Susan Li announced that the company’s total expenses estimate for the year would be higher than previously anticipated. This increase is due to greater infrastructure and legal costs. CEO Mark Zuckerberg acknowledged the need for increased investment in AI, stating, “we’ll still need to expand our investment envelope significantly before we see much income from some of these new products.”
Furthermore, Meta expects its Reality Labs segment, which focuses on AI, AR, and VR activities, to experience significant year-over-year operating losses as it expands. The company is investing aggressively in its AI research and product development efforts.
Despite the poor second-quarter projection, Meta Stock performed well in the first quarter, earning $4.71 profits per share on $36.46 billion in revenue. This exceeded Wall Street’s expectations of an EPS of $4.30 and revenue of $36.12 billion.
Meta Stock’s stock price has been on a steady rise, outperforming its main competitor, Google. Over the past year, Meta stock has risen by 131%, compared to Google’s 50% increase. Year-to-date, Meta stock has increased by more than 39%, while Google has only seen a 13% increase.
The recovery in the digital advertising market has contributed to Meta Stock’s strong performance. Additionally, the stock price soared last quarter when the company announced a dividend payout and increased its stock buyback authorization.
Meta has recently made significant announcements regarding its AI efforts. It launched the Meta AI chatbot and Llama 3 big language model, showcasing its commitment to AI development. However, the chatbot has already faced criticism after joining a private Facebook group for mothers and claiming to have its own child.
In terms of the metaverse, CEO Mark Zuckerberg revealed that Meta would open-source its Horizon operating system for headgear. This move aims to bring more headsets to the market and expand Meta Stock’s presence in the AR/VR arena. The company hopes that by allowing third-party firms to build their own devices based on the software, it can accelerate innovation in this space.
Furthermore, Meta stands to benefit from Congress’ TikTok prohibition, which was signed into law by President Biden. If the app becomes unavailable in the United States, users and content creators may turn to alternative platforms like Instagram, ultimately driving more traffic to Meta Stock.
Overall, while Meta Stock’s second-quarter projection fell short of expectations, the company’s strong performance in the first quarter and ongoing investments in AI and the metaverse position it well for future growth. The market will be closely watching how Meta navigates these challenges and continues to innovate in the social media landscape.
