Now Reading: Meta profit falls 14%, shares drop 12% on AI spending
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Meta profit falls 14%, shares drop 12% on AI spending
The Hindu reports that Meta’s net income fell 14% to $15.8 billion in the quarter, while revenue rose 28% to $60.8 billion, beating estimates. Shares dropped 12% in after-hours trading on scepticism…
The Story in Brief
The Hindu reports that Meta’s net income fell 14% to $15.8 billion in the quarter, while revenue rose 28% to $60.8 billion, beating estimates. Shares dropped 12% in after-hours trading on scepticism about the company’s massive AI spending. The profit decline was driven by $2.4 billion in legal charges and $1.2 billion in severance costs. Meta reaffirmed capital expenditure of $130-145 billion this year, nearly double last year’s, and plans to launch a cloud computing business to rent out its computing power. Reality Labs posted an operating loss of $4.6 billion.
Meta’s results contrast with Microsoft’s, which beat expectations on Wednesday. Amazon and Apple report on Thursday. Meta’s free cash flow dropped sharply to $784 million from $8.5 billion a year earlier, reflecting the AI spending spree.
The Indian Opinion
The narrative that Meta’s AI spending is a reckless gamble ignores revenue growth of 28% and the cloud business it plans to launch. But the faith in AI’s payoff rests on untested consumer demand for smart glasses and enterprise services. Meanwhile, the profit decline was driven by one-time legal and severance costs, not a collapse in advertising. The real test will be whether Meta’s cloud offering can generate enough revenue to justify the $130-145 billion spend, or whether the legal battles over child addiction will eventually drain its cash pile.
Source: thehindu.com
This story was synthesised by AI from the source linked above.
