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Meta’s stock heads south on slow user growth and ongoing infrastructure investments
- Meta Platforms Inc. reported lower-than-expected user numbers and an increase in data infrastructure spending in fiscal 2025.
- Although the company’s earnings before certain costs beat an analyst's target of $5.25 per share, and revenue grew to $40.59 billion, above street consensus estimate of $40.29 billion.
- Meta’s user growth was slower than expected, with just 3.29 billion daily active users across apps like Facebook, WhatsApp and Instagram, a 5% YoY increase but below the expected 3.31 billion.
- Investors are worried that tech giants like Meta, Microsoft and Alphabet are investing too much in infrastructure spending without seeing any immediate returns on those investments.
- Facebook founder and chief executive Mark Zuckerberg justified the infrastructure investments on building Meta’s data centers and creating world-class models and products.
- Meta’s Reality Labs business, which houses its metaverse and virtual reality initiatives, posted an operating loss of $4.4bn in the quarter. This means that Reality Labs has now delivered a total operating loss of more than $58bn since it was founded in 2020.
- Meta increased its capital expenditure guidance for fiscal 2024 to a range of $38bn to $40bn, citing the need to expand its data center infrastructure to support its ambitions in AI.
- Meta said it’s now forecasting its total expenses for fiscal 2024 to come to between $96 billion and $98 billion, down from its previous guidance range of $96 billion to $99 billion.
- Meta is investing in hardware to bolster its core advertising business, which was disrupted by Apple’s 2021 iOS privacy update. More than 1 million advertisers are now using its generative AI technology to improve targeting and generate more compelling ads.
- Wall Street investors are concerned about Meta's scale of infrastructure investments, and the stock fell over 3% in the after-hours trading session.
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