After Wednesday's trading hours Eastern Time, US tech giant Meta released a dazzling Q1 2024 financial report. This financial report exceeded market expectations in both revenue and profit, and its core advertising business growth rate has further increased.
However, Meta's stock price plummeted by over 15% after hours. Based on Meta's market value of 1.25 trillion yuan at Wednesday's close, this means that Meta's post market value has plummeted by nearly $200 billion.
This is in stark contrast to Tesla, which released a worse than expected financial report after hours on Tuesday, but its stock price surged by more than 12% on Wednesday.
This pair of recent satires has left many investors stunned. Some market analysts even posted a picture of Benjamin Graham, the "father of value investing," throwing his work into the trash, exclaiming that "value investing is dead.".
In fact, the reason why Meta's financial report caused a sharp drop in stock prices is actually attributed to its CEO Zuckerberg's lack of storytelling skills.
Meta releases strong report
Firstly, if we roughly observe Meta's financial report, we will find that it can fully handle the word "strong":
Meta's first quarter earnings per share were $4.71, better than analyst expectations of $4.32 per share;
Meta's first quarter revenue was $36.46 billion, which was also better than analyst expectations of $36.16 billion.
Meta's revenue in the first quarter increased by 27% compared to the same period last year, reaching $28.65 billion, the fastest growth rate in any quarter since 2021; Meanwhile, net profit increased by more than double from $5.71 billion ($2.20 per share) in the same period last year to $12.37 billion ($4.71 per share).
The significant increase in Meta's net profit is due to the acceleration of revenue growth and a 16% decrease in sales and marketing costs compared to the same period last year.
Meta's core advertising also performed well, with a 27% growth in the first quarter, reaching $35.64 billion.
Meta is going down the old path of burning money again?
However, the key reason for Meta's significant post market decline is that its outlook for the second quarter is not optimistic.
Meta stated that it expects revenue for the second quarter to be between $36.5 billion and $39 billion, with a median range of $37.75 billion, a year-on-year increase of 18%, lower than the average analyst expectation of $38.3 billion.
To make matters worse, Meta has also increased its annual capital expenditure from its previous forecast of $30-37 billion to $35-40 billion.
Meta claims that this is to further accelerate infrastructure investment in support of the AI roadmap. The company also stated that it expects capital expenditures to increase next year.
This has caused investors to panic, fearing that Meta will once again embark on the costly path of vigorously expanding its "metaverse" business two years ago.
Zuckerberg really doesn't know how to "tell stories"
Zuckerberg's performance on the earnings conference call was also a nightmare, which led to further acceleration of the company's stock sell-off after market hours, indicating that his storytelling ability was clearly far inferior to Musk's.
Zuckerberg not only stated that there will be a significant increase in investment in artificial intelligence, but also that "these investments will meaningfully increase before Meta sees any substantial revenue from these new projects.".
He remained silent on the issue of AI returns, only stating that "smart investors" would see the long-term potential of this work compared to short-term costs.
What's even more frustrating for the market is that executives such as Zuckerberg have talked extensively about the company's currently unprofitable areas such as VR glasses and mixed reality.
Meta Chief Financial Officer Susan Li stated at the financial report that as the company's augmented reality and virtual reality businesses develop, the operating losses of its reality laboratory department will increase year-on-year - it should be noted that the department's revenue in the first quarter of this year was only $440 million, but the loss was as high as $3.85 billion. Since the end of 2020, the total loss of the department has exceeded $45 billion.
Jack Ablin, Chief Investment Officer of Cresset Wealth Advisors, said, "Although Meta will use artificial intelligence in its work, it doesn't seem to be the biggest beneficiary of AI applications right now... Disappointments in revenue mask any optimism about AI. It's hard to say what benefits AI has for users, although AI may ultimately mean some cost savings, it's not yet clear."
Other tech giants have also been implicated
The sharp drop in Meta has even raised doubts in the market about other technology giants with artificial intelligence concepts.
Alphabet Inc. and Microsoft, which are expected to release their financial reports on Thursday, both fell after hours, while Amazon's stock price, which is set to release results next week, also fell more than 2.5%. And NVIDIA, the biggest beneficiary of the artificial intelligence boom, saw its stock price drop by over 1.6% after trading. Micron Technology, AMD and other chip stocks also followed suit.
Analysts at Lynx Equity Strategies have stated that Meta's financial report has raised issues beyond its specific business scope, touching on the core of broader artificial intelligence investment theory.
They stated that all market attention to artificial intelligence is beginning to shift: "Are company management paying attention to the monetization (profit model) issue of generative artificial intelligence?"