Meta shares take $125bn hit as Facebook owner raises spending forecasts

Business

Shares in Meta, the owner of Facebook, WhatsApp and Instagram, have fallen sharply after the company revealed it had raised its cost forecast for the current year.

Investors sent the stock 10% lower in after-hours trading in New York when Meta‘s first quarter results showed further bills were expected to fund new artificial intelligence (AI) products and the infrastructure behind them.

The company, founded and run by Mark Zuckerberg, said it now forecast 2024 capital expenditure in the range of $35 bn-$40bn.

That was up from a previous range of $30bn-$37bn.

It also raised its total expenses forecast to $96bn-$99bn – a rise of $2bn in the low range mark.

The shifts, while hardly huge in scale, nevertheless threaten to reopen old wounds following a 2022 row with investors over Zuckerberg’s bets on technology.

Meta has been updating its ad-buying products with AI tools and short video formats to boost revenue growth, while also introducing AI features like a chat assistant to drive engagement on its social media properties.

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The other main key metrics reported by the company beat financial market expectations, according to LSEG data.

Total revenue rose 27% to $36.5bn and Meta forecast a slight improvement in the current March-June quarter.

However, its low range sum came in below market forecasts and analysts said that the company’s view had contributed to the share price sell-off.

Mark Zuckerberg appears before US Congress
Image:
Mark Zuckerberg, pictured at a US Congressional hearing, is under investor pressure to spend wisely.

A 10% reduction in the share price equated to lost market value of $125bn (£100.3bn) they said, as the values continued to fluctuate.

The stock remains around 30% up on the year to date.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said of the reaction: “Meta’s substantial investment in AI has the ability to hugely improve engagement with its platforms, and therefore the amount marketers are prepared to pay for ad space.

“The group has indeed surpassed expectations in a time when digital advertising uncertainty remains rife.

“Over fifty countries are due… elections this year, which hugely increases uncertainty, and digital spending tends to move down when risks increase.

“This speaks to Meta’s enormous scale and importance to modern-day marketers. Its fortunes are probably also being bolstered by TikTok’s uncertain future in the US. One potential outcome from all this turmoil could well see TikTok added to the Meta family.

“For all Meta’s bold AI plans, it can’t afford to take its eye off the nucleus of the business – its core advertising activities.

“That doesn’t mean ignoring AI, but it does mean that spending needs to be targeted and in-line with a clear strategic view.”

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