Meta Platforms experienced a significant decline in its stock price after reporting earnings of $6.18 per share, which fell short of analysts' expectations of $7.22. Although the company exceeded revenue estimates, its guidance for the upcoming quarter was below expectations, and the number of active users across its apps was also disappointing at 3.6 billion.
Analysts are particularly concerned about Meta's increased capital expenditures, now projected between $130 billion and $145 billion, which have drastically reduced its free cash flow to $784 million from $8.55 billion a year ago. TD Cowen analyst John Blackledge noted that the stock's decline reflects concerns about the timing and scalability of AI monetization amid heavy capital spending.
JPMorgan's Doug Anmuth expressed skepticism about the company's ability to monetize its AI investments beyond advertising, citing a lack of clarity on future plans. Despite the negative reactions, some analysts, like Deutsche Bank's Benjamin Black, believe that Meta's core business remains strong and capable of supporting its AI ambitions.
Price targets from various firms have been adjusted downward, but none have downgraded the stock, indicating a belief in Meta's long-term potential despite current uncertainties surrounding its AI strategy and capital expenditures