Meta, the operator of social media (SNS) Facebook and Instagram, reported first-quarter results that beat market expectations on the back of strong advertising business. But shares plunged on worries about a decline in users and the burden of artificial intelligence (AI) investments.
Meta said on the 29th (local time) that first-quarter revenue rose 33% from a year earlier to $56.31 billion (about 83.6 trillion won). That beat the $55.45 billion estimate compiled by market research firm LSEG.
Revenue in the SNS app product group, the core revenue source including ads, was $55.91 billion (about 83 trillion won), up 33% from the same period last year. Ad impressions rose 19% and the average price per ad climbed 12%, respectively, maintaining the profitability of the ad business.
By contrast, revenue in Reality Labs, which includes the Metaverse (extended virtual world) business and smart glasses, was $402 million (about 600 billion won), down 2.4% from the prior year ($412 million). The institutional sector posted an operating loss of $4.03 billion.
Net income came to $26.77 billion (about 40 trillion won), up 61% from a year earlier. Earnings per share (EPS) were $10.44, well above the market forecast of $6.79. However, excluding $8.03 billion in tax benefits, EPS would be $7.31.
Chief Executive Officer Mark Zuckerberg said, "This quarter showed strong growth across our apps and set important milestones, including releasing the first model from the Meta Superintelligence Lab (MSL)."
He added, "People are using AI to perform work more efficiently, and we are preparing the company's next stage centered on such talent," and "we are streamlining the organization so we do not unnecessarily grow team size."
Meta guided second-quarter revenue at $58 billion to $61 billion, in line with the market expectation of $59.5 billion.
Meta raised its capital expenditure outlook for this year to $125 billion–$145 billion from $115 billion–$135 billion. Meta cited rising component prices and higher data center construction expense as reasons. It also noted regulatory risks in the European Union (EU) and the United States and the possibility of additional lawsuits as variables for results.
Shares were weak. Meta fell 0.3% in regular trading, then slid more than 6% further in after-hours trading following the earnings release, changing hands around $626 as of 6:50 p.m. Eastern time.
The decline was attributed to softening user metrics. According to CNBC, first-quarter daily active people (DAP) was 3.56 billion, down more than 5% from the previous quarter. DAP aggregates daily users who used at least one Meta service such as Facebook, Instagram, or WhatsApp.
Meta pointed to the Iran war and restrictions on WhatsApp access in Russia as reasons for the drop in DAP. The higher capital expenditure outlook was also cited as a factor behind the share decline.
Gil Luria, a director at investment bank D.A. Davidson, said, "Meta's results met expectations, but with Google posting strong numbers, it was not enough to leave an impression on investors."