Meta shares plummet 10%, despite Q1 earnings beat as Q2 outlook disappoints

Meta (META) reported its first quarter earnings on Wednesday, beating analysts’ expectations on the top and bottom line. But a disappointing Q2 forecast sent shares of the social media giant plummeting more than 10% following the announcement.

Meta says it will see second quarter revenue between $36.5 and $39 billion. Estimates were calling for $38.24 billion.

Shares of Meta have been on a tear, climbing 116% over the last 12 months and more than 45% year to date. That’s far better than chief rival Google (GOOG, GOOGL) which is up 45% in the last 12 months and 16% year to date.

While part of Meta’s stock performance has to do with a recovery in the digital advertising market, the company’s stock price truly rocketed higher last quarter after the social media company announced it was initiating a $0.50 per share dividend and increased its stock buyback authorization by $50 billion.

Meta reported earnings per share of $4.71 in the quarter on revenue of $36.46 billion. Wall street was anticipating EPS of $4.30 on revenue of $36.12 billion, according to analysts’ estimates compiled by Bloomberg.

But JPMorgan Securities analyst Doug Anmuth says Meta’s growth spike could face trouble in the coming months.

“There is growing caution into earnings on almost-certain growth deceleration beyond 1Q due to tough [comparisons] & perception of lack of new drivers vs. [2023],” Anmuth wrote in a investor note.

Despite that potential headwind, Meta has a number of strengths going its way, including its emergence as a potential early winner in the AI space, with the technology set to improve Meta’s overall advertising capabilities.

Meta has made a series of announcements regarding its AI efforts in recent months, including debuting its Meta AI chatbot and Llama 3 large language model on April 18. The chatbot, however, has already garnered controversy after it joined a private Facebook group for mothers in Manhattan and claimed to have a child of its own, 404 Media reported.

The bot, which is available across Facebook, Instagram, WhatsApp, Messages, and the Meta.AI website, also can’t be turned off even if users don’t want to use it.

Despite Meta’s increased emphasis on AI, CEO Mark Zuckerberg isn’t giving up on his quest to bring his vision for the metaverse to life. On Monday, he took a further step toward increasing the number of AR/VR headsets on the market, announcing that Meta will make its Horizon operating system for headsets open source, allowing third-party companies to use it to build their own devices.

Meta also stands to benefit significantly if Congress’ TikTok ban, which President Biden signed into law on Wednesday, survives legal challenges. If the app is locked out of the U.S., it stands to reason that users and creators would turn to rival platforms like Instagram to scratch their social media itches.

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