Meta Stock Plunges 16% Despite Record First-Quarter Earnings
Meta reports a doubling in net income and strong revenue growth for the first quarter, but investors sell off shares after a weak second-quarter forecast and increased AI spending plans.
Meta shares plunge 16% in extended trading after the social media giant issues a weak second-quarter forecast that overshadows otherwise stellar first-quarter results. The company reports net income of $12.37 billion, which is more than double the figure from a year ago, while revenue climbs 27% to $36.46 billion. This revenue growth marks the fastest expansion rate for Meta since 2021, driven partly by a 16% drop in sales and marketing costs.
Despite the strong current numbers, investors react negatively to the company's projected second-quarter sales range of $36.5 billion to $39 billion, which falls short of the average analyst estimate of $38.3 billion. The stock sell-off accelerates during the earnings call as CEO Mark Zuckerberg details heavy investments in unprofitable areas like mixed reality glasses and artificial intelligence. He defends these expenses by pointing to the company's historical success in monetizing new services once they reach scale.
Meta also reports that its family of daily active people reaches 3.24 billion in March, representing a 7% increase from the previous year. The sharp investor reaction highlights the high expectations surrounding the stock, which rises about 40% this year after nearly tripling in 2023 following Zuckerberg's "year of efficiency" declaration and massive corporate layoffs.