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In after-hours trading on Wednesday, Meta Platforms Inc (NASDAQ:META) saw a sharp decline in its shares, spurred by a disappointing forecast for second-quarter earnings, which overshadowed its robust first-quarter performance. The company’s stock plunged by 15.3% to $417.83, marking a nearly three-month low. This came after Meta projected second-quarter revenue between $36.5 billion and $39 billion, with a midpoint estimate of $37.75 billion—below the anticipated $38.3 billion.
The ripple effect of Meta’s losses extended to other prominent tech players, casting a shadow over the sector’s upcoming earnings. Microsoft Corporation (NASDAQ:MSFT) dipped 1.9% in after-hours trading, while Alphabet Inc’s class-A shares (NASDAQ:GOOGL) dropped by 3%. Both companies are scheduled to report their first-quarter earnings on Thursday.
Meta’s lackluster outlook primarily stemmed from anticipated higher costs as it intensifies its investments in artificial intelligence (AI). The company now expects capital expenditures for 2024 to range between $35 billion and $40 billion, up from the previous estimate of $30 billion to $37 billion. Despite Meta’s stronger-than-expected first-quarter earnings, the prospect of increased costs dampened investor sentiment.
The trajectory of Meta’s earnings is likely to influence other major internet firms, as they navigate rising costs to leverage AI computing, which has gained significant traction in the past year. While companies like Microsoft have reaped benefits from AI, expenses have surged due to the heightened computing demands of AI programs.
Goldman Sachs (NYSE:GS) maintained its buy rating on Meta, emphasizing the long-term potential of AI despite the initial negative market reaction to the weak outlook. The investment firm noted Meta’s strong performance year-to-date in 2024, highlighting optimism about the company’s future prospects.
