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Meta shares plummet 10% after second quarter outlook disappoints

In Business
April 25, 2024

Meta (META) reported its first quarter earnings on Wednesday, and while it beat analysts’ expectations on the top and bottom lines, a disappointing Q2 forecast sent shares of the social media giant plummeting more than 10%.

Meta says it will see second quarter revenue between $36.5 and $39 billion, falling short of midpoint estimates of $38.24 billion.

In addition to the downbeat Q2 forecast, Meta CFO Susan Li raised the company’s full-year total expenses estimate from between $94 billion and $99 billion to between $96 billion and $99 billion due to higher infrastructure and legal costs. Li said Meta also continues to expect its Reality Labs division to report increased year-over-year operating losses as the company builds out its various AR and VR efforts.

Meta reported earnings per share of $4.71 in the quarter on revenue of $36.46 billion. Wall Street was anticipating EPS of $4.30 on revenue of $36.12 billion, according to analysts’ estimates compiled by Bloomberg.

Shares of Meta have been on a tear, climbing 116% over the last 12 months and more than 45% year to date. That’s far better than chief rival Google (GOOG, GOOGL) which is up 45% in the last 12 months and 16% year to date.

While part of Meta’s stock performance has to do with a recovery in the digital advertising market, the company’s stock price truly rocketed higher last quarter after the social media company announced it was initiating a $0.50 per share dividend and increased its stock buyback authorization by $50 billion.

Despite the underwhelming Q2 forecast, Meta has a number of positives going its way, including its emergence as a potential early winner in the AI space, with the technology set to improve Meta’s overall advertising capabilities.

Meta has made a series of announcements regarding its AI efforts in recent months, including debuting its Meta AI chatbot and Llama 3 large language model on April 18. The chatbot, however, has already garnered controversy after it joined a private Facebook group for mothers in Manhattan and claimed to have a child of its own, 404 Media reported.

On the metaverse front, CEO Mark Zuckerberg announced on Monday that Meta will make its Horizon operating system for headsets open source, allowing third-party companies like Lenovo and Microsoft to use it to build their own devices using the software. The idea is to bring more headsets to market, while increasing Meta’s reach in the AR/VR space.

The company also stands to benefit significantly if Congress’ TikTok ban, which President Biden signed into law on Wednesday, survives legal challenges. If the app is locked out of the U.S., it stands to reason that users and creators would turn to rival platforms like Instagram to scratch their social media itches.

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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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