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Meta’s Stock Plunge: Strong Earnings vs. AI Spending Concerns
Meta Platforms Inc. (NASDAQ: META) saw its shares drop 10% in after-hours trading, even after reporting better-than-expected Q3 earnings. The decline reflects investor anxiety over the company’s soaring AI and metaverse investments, which could pressure profitability in the near term.
Q3 Earnings Beat Expectations—But Spending Steals the Spotlight
Meta’s Q3 results showcased strong performance:
– Revenue: $34.15B (up 23% YoY), beating estimates of $33.56B.
– EPS: $4.39, well above the projected $3.63.
– Daily Active Users (DAUs): 3.14B across Facebook, Instagram, WhatsApp, and Messenger.
Despite these wins, CEO Mark Zuckerberg’s emphasis on aggressive AI and metaverse spending rattled Wall Street. Reality Labs, Meta’s VR/AR division, lost $3.74B in Q3 alone, with Zuckerberg warning that returns could take years.
Why AI Investments Are Scaring Investors
Meta is racing to compete with Google, Microsoft, and OpenAI by:
– Integrating AI into ads and content algorithms.
– Developing its own large language models (LLMs).
– Building costly AI infrastructure (data centers, Nvidia GPUs).
The company now expects 2024 expenses to hit $94B–$99B, raising concerns over shrinking margins in a slowing ad market.
Wall Street’s Mixed Reactions
Analysts are divided:
– Bull Case: Meta’s spending mirrors its past mobile ad shift, which eventually paid off.
– Bear Case: AI’s unclear monetization path and stiff competition could hurt returns.
“The market wants proof AI will drive profits, not just hype,” says Bernstein’s Priya Menon.
What’s Next for Meta?
Key challenges ahead:
– Balancing innovation with investor demands for profitability.
– Proving AI can boost ad sales and e-commerce.
– Stabilizing stock performance amid spending scrutiny.
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