Meta on Wednesday estimated that revenue for the current quarter will fall short of Wall Street expectations and said spend billions of dollars more on its artificial intelligence efforts, even as it reported strong revenues and profits in the first three months of the year.
The company, which owns Facebook, Instagram, WhatsApp and Messenger, had revenue of $36.5 billion in the first quarter, according to data compiled by FactSet, up 27 percent from $28.6 billion a year earlier and below Wall Street's estimate of $36.1 billion. It was slightly more than expected. Profit was $12.4 billion, more than double the $5.7 billion a year earlier.
But Meta's work on AI, which requires substantial computing power, comes with a lofty price tag. The Silicon Valley company said it planned to raise its spending forecast for the year to $35 billion to $40 billion, up from a previous estimate of $30 billion to $37 billion. The move was driven by heavy investment in AI infrastructure, including data centers; chip design; and research and development.
Meta also estimated that revenue for the current quarter would be $36.5 billion to $39 billion, below analysts' expectations.
The combination of higher expenses and lower-than-expected revenue spooked investors, who sent Meta shares down more than 16 percent on Wednesday afternoon after ending regular trading at $493.50.
“Meta's earnings should serve as a stern warning to companies reporting this earnings season,” said Thomas Monteiro, a senior analyst at Investing.com. Although the company's results were strong, “the reported revenue shortfall of expectations does not matter as much” for the current quarter, he said, adding that “investors are currently viewing the near future with great disbelief.”
The meta, which has been in constant change in recent years, has increasingly positioned itself to capitalize on AI. Interest in the technology has increased following the explosion of generative AI, which can produce text, video, audio and images. Meta Chief Executive Mark Zuckerberg has invested in advancing AI for years, some of which has improved the company's advertising systems and boosted its revenue.
After OpenAI released the ChatGPIT chatbot in 2022, Mr. Zuckerberg refocused on Meta to plug AI-powered products into nearly every corner of his empire, from Instagram and Facebook's search tools to image-generation software. And even smart glasses. Last week, Meta unveiled new versions of its AI-powered smart assistant software, which it has included in all of its apps.
Mr. Zuckerberg has also invested billions in graphics processing units, or GPUs, chips that can perform complex calculations to power artificially intelligent systems.
But Meta has continued to spend billions of dollars pursuing Mr. Zuckerberg's vision of a broader digital world, the Metaverse. Meta's hardware division, Reality Labs, lost nearly $3.8 billion in the first quarter while earning revenue of $440 million, heavy on the creation of virtual and augmented reality goggles and software as well as the company's Horizon operating system for VR headsets. Spent.
In a call with investors on Wednesday, Mr. Zuckerberg said the company's Ray-Ban smart glasses — a Reality Labs effort — were an early success and some styles had sold out in some markets. Meta recently updated the glasses with AI software that acts as a type of audio assistant that can answer questions or translate text into different languages.
The meta has experienced many ups and downs in recent years. After a surge in users and activity during the initial COVID-19 lockdown, its business was hit by a decline in the digital advertising market in 2022. Last year, Mr. Zuckerberg initiated a cost-cutting program that eliminated about a third of the company's assets. Flattened layers of the workforce and middle management.
Revenue has increased as the advertising market booms and more people return to one or more of the company's apps on a regular basis.
On Wednesday, Meta said more than 3.24 billion people use one or more of its apps every day. In the investor call, Mr. Zuckerberg specifically called out WhatsApp, noting that the messaging service was one that people regularly return to.
He also had a message for Meta shareholders: Bear with us. “Historically we've seen a lot of volatility in our stock at this stage of our product playbook,” he said on a call with investors.
He pointed to Reels, Meta's TikTok-like video product and Stories, and the company's disappearing photo and video messaging service. Although those facilities had no immediate way to make money, he said, they grew quickly and eventually proved lucrative. Mr. Zuckerberg said Meta generally focuses on building new products that can be used by as many people as possible before worrying about making a profit on them.
He said, money will come.
“We should all have full confidence that if they are on a good track to scale, they will become very big businesses,” he said.