Meta’s Earnings were great! But…
It’s super rare that I see such happenings in the investment world. This is the story: $Meta Platforms (META.US)$ reported its earnings yesterday. It was fantastic! Revenue increased 27% from $28.65 billion in the same period last year; Net income more than doubled from last year to $12.37 billion. One reason for the pop in net income is that, while revenue growth accelerated, sales and marketing costs dropped 16% from the year-earlier period.
Ironically, Meta share price dropped by a whooping 16% after the announcement, wiping out more than $200 billion market cap. That caught my attention. After some digging, I found out that the drop has to do what the CEO Mark Zuckerberg had said during the results briefing.
He started the briefing by talking about AI. He spent time talking about Meta Llama 3, the company’s newest language model. Then he moved onto the Metaverse, touting his company’s headsets, smart glasses and operating system. He spent almost the entirety of his opening remarks focused on the many ways Meta loses money. One of the remarks he made was that Meta will continue to operate efficiently, but that shifting existing resources to investments in AI will “grow our investment envelope meaningfully.”
Ironically, Meta share price dropped by a whooping 16% after the announcement, wiping out more than $200 billion market cap. That caught my attention. After some digging, I found out that the drop has to do what the CEO Mark Zuckerberg had said during the results briefing.
He started the briefing by talking about AI. He spent time talking about Meta Llama 3, the company’s newest language model. Then he moved onto the Metaverse, touting his company’s headsets, smart glasses and operating system. He spent almost the entirety of his opening remarks focused on the many ways Meta loses money. One of the remarks he made was that Meta will continue to operate efficiently, but that shifting existing resources to investments in AI will “grow our investment envelope meaningfully.”
Investors’ were not into those topics at all because 98% of Meta’s revenue comes from digital advertising! On top of that, Meta is expected to spend $35 billion to $40 billion to accelerate its infrastructure investments to support their AI roadmap, up from a prior forecast of $30 billion to $37billion (er.. More like burning money to lose more money at this point?). Because of that, investors reacted with their actions on the market, causing Meta share price to drop that much.
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Qin1314 : $200 billion! A perfect explanation of what is a thousand gold words!