Apr 24, 2024 - Technology

Meta stock sinks on weak forecast

Illustration of a small Meta logo under a magnifying glass surrounded by a larger, out of focus version

Illustration: Sarah Grillo/Axios

Shares in Meta fell more than 15% in trading late Wednesday after the tech giant warned Wall Street that it expects third quarter revenue and earnings to come in short of analyst expectations.

Why it matters: Wednesday's forecast signaled a slowdown for the company, which has otherwise been outperforming against investor expectations over the past year.

Reality check: Meta is one of the few social media firms that's been able to recover all of its losses from the pandemic-driven ad slowdown in 2022.

  • Shares in the company skyrocketed during its last earnings report in February, after the firm declared its first-ever quarterly dividend of $0.50 per share.
  • It's been able to protect its business from the long-term impact of Apple's privacy changes by investing in short-form video and AI ad products.

Driving the news: Outside of its weak forecast, Meta reported an upbeat earnings report.

  • The company exceeded estimates last quarter on top and bottom lines and user growth.
  • The number of people that use at least one of its social networking or messaging apps daily increased 7% year-over-year last quarter to 3.24 billion on average.

The big picture: While the bulk of Meta's business continues to rely on advertising, CEO Mark Zuckerberg stressed to investors that the company plans to invest more in new bets, such as AI and mixed reality.

  • He noted that even with ample investments, revenue from Meta's AI products wouldn't be meaningful for a while.
  • The company said in a statement that it expects operating losses from its Reality Labs division to continue to "increase meaningfully" year-over-year as it invests in product development.

What to watch: Amid the possibility of a TikTok ban, Zuckerberg reminded investors that the company continues to invest in AI content recommendations. More than half of the content on Instagram is recommended by AI, he noted.

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