Meta shares fell nearly 7% in extended trading Wednesday after the company reported lower-than-expected capital expenditures, or capex, and missed user growth.
Meta attributed its quarter-over-quarter decline in users in part to “Internet disruptions in Iran.”
Here’s how the company fared, compared to ratings from analysts polled by LSEG:
- Earnings per share: $7.31 adjusted vs. $6.79 estimated
- Net worth: $56.31 billion vs. $55.45 billion estimated
Revenue rose 33% from $42.3 billion last year, marking the fastest quarter of growth since 2021. The jump reflects Meta CEO Mark Zuckerberg’s focus on artificial intelligence investments, which have yet to generate new revenue but have bolstered the company’s core advertising business.
Zuckerberg has spent the past three months continuing his company’s focus on AI following a strategic shift and talent overhaul that began in June with a $14.3 billion investment in Scale AI and the hiring of CEO Alexandr Wang.
The company reported first-quarter daily active people, or DAP, of 3.56 billion, up 4% from the same period last year but down more than 5% from the fourth quarter. Wall Street was predicting that DAP will come in at 3.62 billion.
Meta said the Iran war and “restricted access to WhatsApp in Russia” were to blame. Meta and three other hyperscalers – Alphabets, Amazon again Microsoft – all results reported on Wednesday, updating investors for the first time since the US began fighting in Iran in late February.
Capital spending came in at $19.84 billion, below the average estimate of $27.57 billion, according to StreetAccount. However, Meta said annual capex will be between $125 billion and $145 billion, up from a previous range of $115 billion to $135 billion.
“This reflects our expectations for higher segment prices this year and, to a lesser extent, additional data center costs to support next year’s capacity,” Meta said in the earnings announcement.
Wall Street has been bullish on the technology sector despite concerns that rising oil prices and supply disruptions from the Iran war will lead to higher costs of AI infrastructure and related data center construction. Tech stocks are poised to end their best month since April 2020, the early days of the Covid pandemic, with the Nasdaq up 14% for the month as of Wednesday’s close.
First-quarter average revenue per capita came in at $15.66, beating the average analyst estimate of $15.26, according to StreetAccount. Average revenue was $16.56 in the fourth quarter.
Meta’s second-quarter revenue forecast was roughly in line with expectations. The company reported sales between $58 billion and $61 billion, while analysts were calling for $59.5 billion. In the middle of the range would be equivalent to an increase of about 25%.
Net income for the first quarter rose to $26.8 billion, or $10.44 a share, from $16.6 billion, or $6.43 a share, a year ago. The profit jump included an $8.03 billion income tax benefit, which was a change consistent with the Trump administration’s tax and spending bill. Diluted EPS would have been $3.13 lower without the tax benefit, Meta said.
Meta said many of its legal cases related to youth safety “ultimately could result in material losses.” The company lost two lawsuits in March, both involving allegations that the company misled consumers about the harms of its products.
The number of subscribers rose 1% year-over-year to 77,986 as of March 31. As it ramps up capex spending, Meta is trying to cut all of its workforce. The company said last week it was laying off about 10% of its workforce, or 8,000 employees, while not hiring for 6,000 open roles. Those cuts follow January layoffs affecting about 1,000 people at the company’s Reality Labs division, while another round in March targeted hundreds of employees in areas such as Facebook, global operations and sales.
Earlier this month, Meta released the Muse Spark as its first proprietary base model. Investors will now look to Zuckerberg to begin laying out a clear strategy for monetization.
“We had a historic quarter with strong momentum across our applications and the release of our first prototype at Meta Superintelligence Labs,” Zuckerberg said in a statement. “We’re on our way to bringing personalized information to billions of people.”
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