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Meta Shares Plunge $200 Billion on Cash Drain Focus

Meta's plummeted by as much as 19% in extended trading on Wednesday, wiping out over $200B in market capitalization
April 26, 2024

Mark Zuckerberg's opening remarks during Meta's earnings call highlighted the company's ambitious plans in artificial intelligence (AI) and the metaverse. Despite reporting better-than-expected profits and revenue for the first quarter, Meta's shares plummeted by as much as 19% in extended trading on Wednesday, wiping out over $200 billion in market capitalization.

Zuckerberg addressed the sell-off, attributing it to the company's history of volatility during phases of product expansion. Meta generates 98% of its revenue from digital advertising, but Zuckerberg emphasized the potential for future ad revenue from new investments. He discussed Meta's efforts in building a leading AI, hinting at possibilities like scaling business messaging and introducing ads or paid content into AI interactions.

Zuckerberg also highlighted Meta's recent developments in AI, including Meta Llama 3, the company's latest large language model, and Meta AI, the company's response to OpenAI's ChatGPT. He then shifted focus to opportunities for expansion within the mixed reality headset market, mentioning the newly opened access to the operating system powering Meta's Quest headsets.

Additionally, Zuckerberg emphasized Meta's AR glasses, which he described as "the ideal device for an AI assistant" due to their ability to provide a shared visual and auditory experience.

Meanwhile, Meta's Reality Labs unit, responsible for developing the metaverse, continues to face financial losses. Despite reporting sales of $440 million for the first quarter, the division reported losses of $3.85 billion, adding to its cumulative losses of over $45 billion since the end of 2020.

Despite the recent stock plunge, Meta's stock price nearly tripled last year and was up 40% in 2024. Zuckerberg's cost-cutting plan, initiated early last year, appears to have garnered confidence from investors, leading to a significant stock rally. However, Meta issued a light revenue forecast for the second quarter, overshadowing its first-quarter performance.

Despite Meta's strong first-quarter earnings, investor skepticism persists, leading to a significant stock plunge. Mark Zuckerberg's emphasis on long-term investments in AI and the metaverse, despite short-term financial setbacks, underscores Meta's commitment to future growth. As Meta navigates its multiyear investment cycle, its ability to scale AI products profitably will be closely watched by investors.

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