Meta wants to spend more even after it lost $80 billion on the Metaverse and over 20 million users
Meta reported strong first-quarter earnings with $56.3 billion in revenue and a 33% year-over-year increase, but its stock dropped nearly 9% due to a 20-million user decline and a significant rise in AI and metaverse spending. Despite losing $4.03 billion in its Reality Labs division during the quarter, the company plans to increase capital expenditures to between $125 billion and $145 billion, driven by growing AI compute demands. Meta attributed part of the user decline to internet disruptions in Iran and restricted WhatsApp access in Russia, while analysts suggest investors may be overlooking the company's core advertising and AI-driven monetization strengths.
- ▪Meta reported $56.3 billion in revenue and $26.8 billion in net income for the first quarter, exceeding analyst expectations.
- ▪The company saw a 20-million user decline in its family of apps, which it attributed to internet disruptions in Iran and WhatsApp restrictions in Russia.
- ▪Meta's Reality Labs division reported a $4.03 billion operating loss in the first quarter, contributing to nearly $80 billion in cumulative losses since 2020.
- ▪The company raised its capital expenditure forecast to between $125 billion and $145 billion, citing underestimated AI compute needs.
- ▪Meta announced workforce reductions, including a 10% cut to Reality Labs and an overall 10% company-wide layoff affecting about 8,000 employees.
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Despite strong first quarter results, Meta’s stock plummeted nearly 9% Thursday thanks in part to a 20-million user drop and a massive spike in AI spending even as it continues to pour billions into its metaverse and virtual reality division, Reality Labs.Recommended Video The company, which reported its first quarter results Wednesday afternoon, exceeded analyst expectations on both net income and revenue, which stood at $26.8 billion (partly boosted by a one-time $8 billion tax benefit) and $56.3 billion, respectively, according to a filing with the Securities and Exchange Commission. Meta also saw a 33% revenue increase compared to the same quarter last year, its biggest year-over-year increase in five years. Yet, investors apparently paid more attention to the bad news.
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