Meta stocks sink more than 15% as it expects quarterly revenue and earnings to fall short

While most tech companies working with AI are seeing are raking in record amounts of money as revenue, and seeing their stocks go up, the situation at Meta is slightly different.

Meta shares took a nosedive late Wednesday, plummeting more than 15 per cent in trading after the tech giant cautioned Wall Street that its third-quarter revenue and earnings are anticipated to fall short of analyst expectations.

This development holds significance as it signals a notable slowdown for Meta, which has otherwise consistently surpassed investor forecasts over the past year.

Meta stands out among other social media companies for it is the only one that has managed to rebound from the pandemic-induced advertising slowdown in 2022, reclaiming practically all its losses.

The company witnessed a surge in shares during its previous earnings report in February, fueled by the announcement of its inaugural quarterly dividend of $0.50 per share.

Additionally, Meta’s strategic investments in short-form video and AI ad products have shielded its business from the effects of Apple’s privacy changes.

Despite the disappointing forecast, Meta delivered an upbeat earnings report. It surpassed estimates in the last quarter on both top and bottom lines, alongside robust user growth.

The number of daily active users across its social networking and messaging apps saw a 7 per cent year-over-year increase, reaching an average of 3.24 billion.

While advertising remains Meta’s primary revenue driver, CEO Mark Zuckerberg emphasized the company’s commitment to investing in new ventures like AI and mixed reality. He acknowledged that revenue from Meta’s AI products would take time to materialize, despite significant investments.

Meta anticipates operating losses from its Reality Labs division to notably rise year-over-year due to intensified product development efforts.

In light of the potential TikTok ban, Zuckerberg reassured investors of Meta’s ongoing investment in AI content recommendations. He highlighted that over half of the content on Instagram is currently recommended by AI algorithms.

As Meta navigates challenges and invests in future opportunities, market watchers are keen to observe how the company’s strategic decisions will impact its trajectory in the ever-evolving tech landscape.

(With inputs from agencies)