The skyrocketing costs are mainly due to their heavy spending on AI and the infrastructure needed to run their new inventions. Meta warned that their total expenses could reach a whopping $99 billion.
According to Meta, they’ll need to make some “meaningful” investment increases before they start seeing any real cash flow from these new services, as quoted by CEO Mark Zuckerberg.
One example is their chat assistant, designed to boost engagement on their social media platforms. However, an analyst speaking to Reuters expressed investor concerns that these projects could take years to turn a profit.
This cost warning sent shivers down the spines of investors in other major AI players, including Microsoft and Nvidia, whose shares also took a tumble.
While Meta’s first-quarter revenue of $36.5 billion met expectations, their forecast for the coming quarter (April-June) fell a bit short. There’s a chance they could benefit from the U.S. taking action against their competitor, TikTok.
Lawmakers just gave the green light to a measure this week that could potentially nix the Chinese-owned short video app, TikTok. This move comes amid concerns about national security threats.
However, Meta’s CFO, Susan Li, threw some cold water on things, saying it’s still too early to tell what the real impact of any ban might be. TikTokers will soon resort to this situation, but you’re safe for sure with the best VPN for TikTok subscription.
Here’s Why the Stocks Keep Falling Down:
Meta’s stock is falling despite exceeding first-quarter earnings expectations because of two main reasons:
- Higher Expenses: Meta spooked investors with forecasts of significantly increased spending. This surge is largely due to their heavy investments in Artificial Intelligence (AI) and the infrastructure required for their new products. The company warned that total expenses could reach a staggering $99 billion.
- Weaker-than-expected Revenue Outlook: While Meta’s first-quarter revenue met expectations, their forecast for the upcoming quarter fell short. This suggests that their current revenue streams might not be keeping pace with their ambitious spending plans.