Meta shares sink on higher AI spending, light revenue forecast

CALIFORNIA: Meta Platforms (META.O), opens new tab disappointed investors on Wednesday with forecasts of higher expenses and lighter-than-expected revenue, knocking nearly $200 billion off its stock market value and raising fears the surging cost of AI is outpacing its benefits.

Shares of the Facebook and Instagram parent dropped about 15% in extended trade following the report, its market capitalization plunging to about $1 trillion.

The late-day slump in Meta's stock value was just short of the $232 billion one-day loss suffered on Feb. 3, 2022, which was the record one-day loss of market capitalization for any U.S. company.

Alphabet (GOOGL.O), opens new tab shares fell 3% in extended trade and Microsoft (MSFT.O), opens new tab declined 2%, with concerns that Wall Street may have underestimated the cost of the AI race hitting those Big Tech companies ahead of their reports on Thursday.

Meta said it expects April-June revenue in the range of $36.5 billion-$39 billion, with a midpoint of $37.8 billion, compared with analysts' estimates of $38.3 billion, according to LSEG data.

The company raised its forecast for expenses this year to support investments in new AI products and the computing infrastructure needed to support them, adding that it expected spending would continue to increase next year.

It raised its 2024 total expense forecast to $96 billion-$99 billion, from $94 billion-$99 billion. It also expects 2024 capital expenditure to fall within a range of $30 billion-$40 billion, up from its earlier forecast of $35 billion-$37 billion, it said.

CEO Mark Zuckerberg told analysts on a conference call that the focus on AI would "grow our investment envelope meaningfully before we make much revenue from some of these new products."