Meta Platforms’ stock fell early Thursday after the company announced plans to boost its AI spending. This increase is partly due to higher costs for materials, and it overshadowed the social media giant’s better-than-expected revenue and profits.
The company reported its first-quarter earnings on Wednesday. Profits beat forecasts, with earnings per share (EPS) hitting $10.44 on revenue of $56.3 billion. Wall Street analysts had expected adjusted earnings of $8.15 per share on revenue of $55.5 billion, according to Bloomberg estimates.
If you take out an $8 billion one-time tax benefit, Meta’s earnings per share would have been $7.31. The company expects revenue in the current quarter to be between $58 billion and $61 billion.
Investors were also keenly waiting for an update on Meta’s spending plans in the report. The results showed that overall company costs are expected to stay steady. However, its capital expenditures—which are more focused on AI-related investments—are projected to rise. Meta stock was down over 8% in premarket trading following these results.
The market’s reaction suggests that while Meta is performing well financially in its core business, the prospect of even higher AI-related costs is a concern for investors. Companies are pouring vast sums into AI development, and the returns on these massive investments are still somewhat uncertain.
This situation reflects a broader trend in the tech industry. Giants like Meta are in an intense race to lead in AI. This competition often requires significant upfront spending on infrastructure, research, and talent. Even with strong quarterly results, the commitment to ever-increasing AI investments can sometimes make investors cautious about future profitability.
Meta’s focus on AI is a strategic long-term play, aiming to secure its future dominance in social media and beyond. However, in the short term, these elevated spending forecasts appear to be impacting investor confidence, despite the solid performance of its advertising business.
