Could this Be the Fall of Meta?
Meta, the US tech giant, is currently going through a decline in shares during after-hours trading despite exceeding expected earnings. This is being dubbed as the fall of Meta.
What’s Going on Meta?
The Facebook, Instagram, and WhatsApp parent company announced increased expenses for 2024, primarily due to heavy investments in AI technology, with shares dropping over 15% as Meta anticipated due to spending billions of dollars, which was more than it had earned.
Meta has prioritized integrating AI features across its platforms, including chat assistants, to allow for a better user experience. The 2024 spending is expected to reach $35-$40 billion, which is higher from the previous estimate of $30 to $37 billion. Despite exceeding earnings expectations, the stock experienced a downturn.
First-quarter revenue surged by 27% to $36.46 billion, slightly surpassing analysts’ projections of $36.16 billion in earnings.
Principal equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, noted Meta’s “bold” spending strategies, emphasizing the giant’s substantial AI investment, which enhances user engagement, prompting advertisers to increase spending despite digital advertising’s uncertain landscape.
Lund-Yates suggested Meta’s fortunes could benefit from TikTok’s uncertain future in the US, as the video-sharing platform faces legal battles amid potential sale or ban in the US. While Meta’s financial prowess can handle legal challenges, regulatory risks loom large.
Previous fines for mishandling data and recent criticisms against CEO Mark Zuckerberg highlight regulatory challenges. Despite resources for legal battles, market sentiment remains subject to fluctuations.
The Metaverse and the Meta Fall
Meta Platforms has invested a large sum of cash into developing virtual and augmented reality technology. The metaverse enjoyed a brief moment of fame, but unfortunately, is no longer in the spotlight.
Reality Labs, Meta’s sector focusing on metaverse tech, amassed $6.3 billion in revenue across three years. However, it incurred a staggering operating loss of $40 billion. Projections indicate a surpassing of last year’s $16 billion loss in 2024. This represents a significant investment in computing’s future.
Where will Meta be headed to after this, will it be like Humpty Dumpty when he sat on the wall?
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