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Meta’s revenues jumped more than a quarter in the first three months of the year, beating expectations, but shares fell about 12 per cent in after-hours trading on Wednesday as Wall Street reacted to its continued artificial intelligence spending spree.
Revenues at the social media group rose 27 per cent to $36.5bn, just above analysts’ expectations of a rise to $36.2bn, according to an earnings release. Meta also raised the high end of its full-year capital expenditure guidance from $37bn to $40bn in order to “continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap”.
It added it expected capital expenditures to “continue to increase next year” and also raised the lower range of its 2024 full-year expenses guidance, from $94bn to $96bn.
Prior to the announcement, Meta’s stock had risen more than 40 per cent this year, having been in record territory since a bumper fourth-quarter earnings announcement in February during which it announced its first dividend and signalled a strong recovery from a recent advertising slump.
Meta said it anticipated current-quarter revenues in the range of $36.5bn to $39bn, versus consensus estimates of $38.3bn.
Last year, chief executive Mark Zuckerberg sought to keep Wall Street happy against a backdrop of tough macroeconomic conditions, slashing jobs, cutting costs and labelling 2023 a “year of efficiency” for the company.
However, he is increasingly under pressure to keep pace in the fast-moving AI race with Silicon Valley groups such as OpenAI, Microsoft and Alphabet’s Google, which has forced him to boost investment in the costly technology and infrastructure required to support his AI plans.
Meta has focused on introducing chatbots to its social media apps to boost engagement, as well as AI features for advertisers and improving the targeting of its feeds.
Meta this month released a new version of the AI model behind its chatbots, Llama 3, which it said had vastly improved capabilities, including the ability to reason. The company also unveiled a new generation of its AI custom-made chips.
Meta also continues to invest in Zuckerberg’s longer-term ambitions to build an avatar-filled metaverse. Reality Labs, its virtual and augmented reality arm, posted losses of $3.85bn in the first quarter, about the same as the previous year, with the company adding it continued to expect operating losses to “increase meaningfully” year-over-year.
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