Meta’s revenue weakens with increased AI spending.

Meta, previously Facebook, is seeing a drop in revenue as it increases its investments in artificial intelligence technology. Despite a solid second quarter financial performance, the company’s plans to dedicate more funding to AI development have alarmed investors, resulting in a sharp decline in share price.

During the first quarter, Meta’s revenue increased by 27% to $36.46 billion, beating analyst estimates. Earnings per share also more than doubled, above Wall Street expectations.

However, concerns arose when Meta anticipated reduced sales growth of around 18% for the next quarter, forecasting $37.75 billion vs analysts’ expectations of $38.3 billion.

Furthermore, Meta expects greater capital expenditures of $30 billion to $40 billion for the year, up from the previous prediction. This revelation, combined with the lack of dividend issue in the first quarter, has resulted in a significant drop in after-hours trading.

Despite these hurdles, Meta’s CEO, Mark Zuckerberg, is confident about the company’s future, citing improvements in AI development and consistent growth across its platforms.

While investors have applauded Meta’s shift to AI investment, regulatory concerns remain. The corporation is being scrutinized for its handling of user content and protection of children, with continuing lawsuits and governmental inquiries.

As Meta navigates these challenges, the tech behemoth hopes to keep its pace despite mounting expenses and regulatory restrictions, with a sustained emphasis on innovation and expansion.