Wednesday , December 11 2024

Meta shares sink after it reveals spending plans

26-04-2024

NEW YORK: Shares in US tech giant Meta have sunk in US after-hours trading despite better-than-expected earnings.

The Facebook and Instagram owner said expenses would be higher this year as it spends heavily on artificial intelligence (AI).

Its shares fell more than 15% after it said it expected to spend billions of dollars more than it had previously predicted in 2024.

Meta has been updating its ad-buying products with AI tools to boost earnings growth.

It has also been introducing more AI features on its social media platforms such as chat assistants.

The firm said it now expected to spend between $35bn and $40bn, (£28bn-32bn) in 2024, up from an earlier prediction of $30-$37bn.

Its shares fell despite it beating expectations on its earnings.

First quarter revenue rose 27% to $36.46bn, while analysts had expected earnings of $36.16bn.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said its spending plans were “aggressive”.

She said Meta’s “substantial investment” in AI has helped it get people to spend time on its platforms, so advertisers are willing to spend more money “in a time when digital advertising uncertainty remains rife”.

More than 50 countries are due to have elections this year, she said, which “hugely increases uncertainty” and can spook advertisers.

She added that Meta’s “fortunes are probably also being bolstered by TikTok’s uncertain future in the US”.

Meta’s rival has said it will fight an “unconstitutional” law that could result in TikTok being sold or banned in the US.

President Biden has signed into law a bill which gives the social media platform’s Chinese owner, ByteDance, nine months to sell off the app or it will be blocked in the US.

Lund-Yates said that “looking further ahead, the biggest risk (for Meta) remains regulatory”.

Last year, Meta was fined €1.2bn (£1bn) by Ireland’s data authorities for mishandling people’s data when transferring it between Europe and the US and in February of this year, Meta chief executive Mark Zuckerberg faced blistering criticism from US lawmakers and was pushed to apologies to families of victims of child sexual exploitation.

Lund-Yates added that the firm has “more than enough resources to throw at legal challenges, but that doesn’t rule out the risks of ups and downs in market sentiment”.

Facebook’s owner, Meta, has been fined €1.2bn (£1bn) for mishandling people’s data when transferring it between Europe and the United States.

Issued by Ireland’s Data Protection Commission (DPC), it is the largest fine imposed under the EU’s General Data Protection Regulation privacy law.

GDPR sets out rules companies must follow to transfer user data outside of the EU.

Meta says it will appeal against the “unjustified and unnecessary” ruling.

At the crux of this decision is the use of standard contractual clauses (SCCs) to move European Union data to the US.

These legal contracts, prepared by the European Commission, contain safeguards to ensure personal data continues to be protected when transferred outside Europe but there are concerns these data flows still expose Europeans to the US’s weaker privacy laws and US intelligence could access the data. (Int’l News Desk)

Check Also

India replaces central bank governor in a surprise move

11-12-2024 Bureau Report NEW DELHI: India has appointed career civil servant Sanjay Malhotra as its …