Shares of Meta (META) fell by 15% in after-hours trading following a disappointing outlook for Q2 revenue and plans to increase spending in artificial intelligence (AI) this year. The company’s metaverse division is also expected to continue operating at a loss.
Susan Li, Meta’s financial chief, stated in the Q1 results on April 24 that the company’s revenue guidance for Q2 is projected to be between $36.5 billion and $39 billion, which is below Wall Street’s expectations of $38.3 billion. Li anticipates that expenses will rise to between $96 billion and $99 billion due to higher infrastructure and legal costs.
Additionally, Meta has increased its capital expenditures for the full year of 2024 to a maximum of $40 billion, up from the previous estimate of $37 billion. This increase is intended to support the company’s ambitious AI research and product development.
In Q1, Meta reported revenues of $36.46 billion, a 27% year-on-year increase that surpassed analysts’ estimates by 0.48%. Earnings per share also doubled to $4.71, beating estimates of $4.32 per share.
However, Meta’s metaverse division, Reality Labs, experienced a loss of $3.85 billion in Q1, down from nearly $4 billion in Q1 2023. Meta expects these losses to continue increasing as it invests in the division’s product development.
CEO Mark Zuckerberg stated that an increasing amount of Reality Labs’ work is focused on supporting the company’s AI efforts. He acknowledged that building the leading AI will be a larger undertaking than previous experiences added to Meta’s apps and will likely take several years.
On April 24, Meta’s shares dropped 15.4% to $417.22, following a 0.5% decrease to $493.50 earlier in the day. However, the stock is still up 42.5% year-to-date, reaching an all-time high of $527.34 on April 5.
In other news, Meta recently launched its Llama 3 AI model on April 18. The model was integrated into the Meta AI chatbot, which is available on Facebook, Instagram, WhatsApp, and Facebook Messenger. However, there have been reports of the chatbot posting strange interactions, such as claiming to have a child.
Despite these reports, Meta claims that human evaluators ranked Llama 3 higher than other models, including OpenAI’s ChatGPT-3.5.