Meta Platforms Forecasts Lower Q2 Revenue Amid Increased AI Investment Plans

Meta Platforms Adjusts Revenue Expectations Amid AI Investment Surge

Meta Platforms announced on Wednesday a revision in its revenue forecast for the second quarter, projecting lower-than-expected figures as it plans to significantly increase its annual investment to capitalize on the artificial intelligence (AI) trend. The company now anticipates Q2 revenues to be between $36.5 billion and $39 billion, with a midpoint of $37.75 billion, falling short of the anticipated $38.3 billion.

This updated revenue outlook is part of a broader strategy where Meta expects to boost its full-year 2024 capital expenditures to between $35 billion and $40 billion, up from the previously forecasted range of $30 billion to $37 billion. The increase is intended to accelerate infrastructure investments crucial for its AI development initiatives.

Despite these financial projections, Meta’s first-quarter results surpassed analyst expectations, reporting earnings of $4.71 per share against revenues of $36.46 billion, whereas forecasts by Investing.com had predicted earnings of $4.32 per share on revenues of $36.14 billion.

The company also reported a 7% year-over-year growth in family daily active users (DAP), reaching 3.24 billion in March 2024. However, the increased expenditure on AI technology and data centers is expected to impact profit margins and could hinder not only Meta’s innovative endeavors but also its user acquisition efforts.

Thomas Monterio, an analyst from Investing.com, commented, “Investors are now accounting for narrower margins than previously anticipated at Zuckerberg’s firm, which could reduce its competitive edge, especially in areas like VR and AI.” Monterio also noted, “The intensified spending may inevitably reduce funds available for user growth, potentially leading to a decline in this metric in the upcoming quarter.”

Despite these concerns, Monterio advised investors against overreacting, pointing out that Meta has multiple growth avenues that could gain momentum throughout the year as it shifts towards less advertising-dependent revenue models.

Following this announcement, shares of Meta Platforms Inc (NASDAQ:META) experienced a sharp decline of over 11% in after-hours trading.

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