Shares in Meta, the company behind Facebook, WhatsApp, and Instagram, plummeted over 15% in after-hours trading in New York following the announcement of increased spending on artificial intelligence (AI), despite the firm's strong earnings report.
CEO, Mark Zuckerberg, acknowledged that it would take time for the substantial AI investment to yield revenue growth. Meanwhile, Meta's competitor, Threads, boasting over 150 million monthly active users, has further intensified competition, particularly against Elon Musk's ‘X’ platform.
Analysts highlighted Threads' potential as a desirable alternative to Twitter for users and advertisers. Moreover, Meta anticipates potential benefits from the fate of TikTok in the US, an issue the app is vigorously contesting.
Meta's strategic focus on AI is apparent in its endeavors to improve ad-buying products and incorporate AI functionalities across its platforms to stimulate earnings growth.
Despite investors' concerns about increased spending, Meta's first-quarter revenue surged 27% to USD 36.46 billion, surpassing analysts' expectations. However, regulatory challenges, including past fines and data privacy scrutiny, pose ongoing risks for Meta, despite its resources to address legal issues.
