Meta shares plunge 15% after subdued guidance, increased capex overshadow earnings beat

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Meta, the parent company of social media platform Facebook plunged as much as 19% in extended trading on Wednesday after its second quarter revenue guidance missed analyst expectations.

The Mark Zuckerberg-led company expects sales in the June quarter to range between $36.5 billion to $39 billion. The mid-point of that range, $37.75 billion, is below the average analyst estimate of $38.3 billion.

While the company no longer reports daily and monthly active users, it gives a figure for “family daily active people,” which stood at 3.24 billion during the quarter, a growth of 7% year-on-year.

Advertising revenue, which comprises of a majority of Meta’s topline, grew by 27% from last year to $35.64 billion during the March quarter. While it did not quantify the revenue from China, it said that advertising revenue from the Asia-Pacific increased by 41% from the year-ago period.

Meta also said that it will spend billions more than anticipated this year in artificial intelligence investments. It expects capex to range between $35 billion to $40 billion compared to earlier estimates of $30 billion to $37 billion.

Reality Labs, the Meta division focused on its futuristic bets, reported a loss of $3.85 billion for the first quarter, roughly the same as a year ago. That division, which also oversees VR headsets and Meta’s Ray-Ban smart glasses, reported an annual loss of more than $16 billion in 2023.

These metrics overshadowed what was otherwise a solid first quarter, with revenue of $36.5 billion, an increase of more than 27% over the same period a year ago. And profit that more than doubled to $12.4 billion.

On a call with investors, Zuckerberg said Meta will invest “significantly” in AI-related projects. He said these investments will increase “meaningfully” before Meta sees any significant revenue from many of these new endeavors. “Smart investors” will see the long-term possibilities of this work will outweigh the short term costs, Zuckerberg said.

Meta’s headcount declined 10% from a year earlier to 69,329. Meta had cut about 21,000 jobs in the first half of 2023 and Zuckerberg in February this year had spoken about hiring being “relatively minimal compared to what the company has done historically.”

Shares of Meta fell 15% in extended trading to $418.78. This after a 40% rally so far in 2024 before Wednesday and the stock having tripled in 2023.

(With Inputs From Agencies.)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow