Meta stock to plunge late on Wednesday.

The Facebook parent company’s first-quarter data appear to have fallen short of the extremely high expectations, which caused Meta stock to plunge late on Wednesday. Executives at Meta Platforms (META) provided a lower-than-expected sales outlook for the current quarter, despite the fact that the company exceeded consensus estimates for both earnings and sales.

In the meantime, Meta’s efforts to become a pioneer in generative AI are driving up expenses. In its news announcement, the Menlo Park, California-based firm stated that infrastructure investments were necessary to support its “AI road map,” which led to an increase in its projection for overall spending. All of those factors added up to a recent after-hours stock market decline of more than 16% today.

Despite Meta’s first-quarter earnings exceeding expectations, the negative reaction is still present. In a press statement, the company stated that its $36.46 billion in sales for the quarter ending in March translated into earnings per share of $4.71. According to FactSet, analysts predicted that Meta would report earnings of $4.32 per share on revenues of $36.14 billion. Year over year, sales climbed by 27% and earnings by 114%.

Meta-Advice for the Second Quarter of 2024 for the Meta stock

Its forecasts for the current quarter may be the cause of the negative reaction towards Meta stock. At the middle of its range, Meta projected sales of $37.75 billion, or between $36.5 billion and $39 billion. According to FactSet, analysts had predicted $38.25 billion in revenue for the June-ending quarter, but that amount fell short of that amount.

In contrast to the sales increase of 27%, 24.7%, and 23.2% in Meta’s three prior quarters, the midpoint of its range would indicate approximately 18% year over year revenue growth for the company’s second quarter. However, experts predicted that Meta’s growth rate will decrease this year due to more difficult comparisons between the company’s previous year and this one.

That being said, some investors might have been taken aback by the growing costs.

Instead of the $30 billion to $37 billion range that the business had previously projected, Meta now forecasts capital expenditures between $35 billion and $40 billion this year. Instead of the earlier range of $94 billion to $99 billion, Meta now projects total expenses for the year to be between $96 billion and $99 billion.

Analyst Brent Thill at Jefferies stated in a client letter on Wednesday that “lighter than expected Q2 revenue guidance and increases in the total expense and capex guides could weigh on the stock.”

Chief Executive Officer Mark Zuckerberg announced during a teleconference with analysts on Wednesday that the business last week delivered improvements to its Llama big language model and Meta.ai chatbot.

“I view the results our teams have achieved here as another key milestone in showing that we have the talent, data and ability to scale infrastructure to build the world’s leading AI models and services,” Zuckerberg told reporters. “And this leads me to believe that we should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world.”

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