Meta shares slump 15%, drag down peers as revenue guidance disappoints By

Meta shares slump 15%, drag down peers as revenue guidance disappoints By–Shares of Meta Platforms Inc (NASDAQ:) fell sharply in after-market trading on Wednesday after a disappointing outlook for second-quarter earnings more than offset strong first-quarter earnings as sales hit on other major technology stocks.

Meta shares fell 15.3% to $417.83 – a nearly three-month low – after it forecast second-quarter revenue of between $36.5 billion and $39 billion, or $37.75 billion at the midpoint – lower than estimates of $38.3 billion.

Meta’s stock losses spilled over to other major Internet companies, as they set a gloomy tone for upcoming profits in the sector. Microsoft Corporation (NASDAQ:) fell 1.9% in aftermarket trading, while Class A shares of Google parent Alphabet Inc (NASDAQ:) fell 3%. Both companies are expected to report first-quarter results after the bell on Thursday.

Losses for Meta and its peers fell more than 1% on Wednesday.

Meta’s weaker-than-expected outlook is primarily fueled by expectations of rising costs as the company increases its investments in artificial intelligence. Capital spending for 2024 is now expected to be between $35 billion and $40 billion, compared to a previous range of $30 billion and $37 billion.

The higher cost outlook more than offset the Facebook owner’s higher-than-expected first-quarter profits.

Meta’s profits are likely to set a precedent for other major Internet companies as they incur increased costs to gain an edge in AI computing, which has gained popularity over the past year.

While majors such as Microsoft have already reaped higher profits from AI, costs have been rising steadily, given the high computing demands of AI programs.

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Nonetheless, Goldman Sachs maintained its Buy rating on Meta, stating that while investors were initially expected to have a negative reaction to the weak outlook, there was still potential in AI and that the stock had recorded solid performances since the start of the year. 2024.

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