This article originally appeared on Business Insider.
Despite posting record revenue for the January-March quarter, Meta’s stock is being bogged down on Wednesday by the company’s increasing investments in AI.
Meta reported a 27% year-over-year increase with $36.46 billion in sales for Q1, beating analysts’ forecasts.
Yet, shares for Meta tumbled about 16% after trading hours on Wednesday following the company’s first-quarter results.
Meta, the parent company of Facebook, Instagram, and WhatsApp, forecasted that its revenue for the second quarter will fall in the range of $36.5 billion to $39 billion. Analysts estimated the company would see revenue closer to $38.24 billion.
A second aspect of Meta’s report that’s clouding the first-quarter performance results is the company’s massive investments in AI, which CEO Mark Zuckerberg said will be necessary before the company can expect to see major returns.
Meta said that it expects capital expenditures for 2024 to fall in the range of $35 billion to $40 billion, which is higher than the $30 billion to $37 billion expectation, as it continues to invest in infrastructure for artificial intelligence.
Zuckerberg told shareholders during the Wednesday earnings call that Meta’s stock volatility is par for the course for any new project or feature the company was working on that wasn’t immediately generating revenue. Meta’s investment in AI is no different, Zuckerberg said, but the CEO cautioned that the returns for artificial intelligence will take some time.
“Historically, investing to build these new scaled experiences in our apps has been a very good long-term investment for us and for investors who have stuck with us. And the initial signs are quite positive here too,” he said. “But building the leading AI will also be a larger undertaking than the other experiences we’ve added to our apps and this is likely going to take several years on the upside once our new AI services reach scale.”
In the lead up to the first-quarter results, Meta launched its latest version of its chatbot, Llama 3, which will power the company’s new AI assistant, Meta AI.
Zuckerberg said that the AI assistant will be integrated into many of Meta’s products, including Instagram and Facebook.
Meta said that Llama 3 is the “most capable” open source model out there, but as Business Insider’s Hasan Chowdhury reported, the tool has yet to beat ChatGPT 4, OpenAI’s language model that was released last year.
A Meta spokesperson declined to provide comment.
