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Shares in Meta – the owner of Facebook, WhatsApp and Instagram – fell sharply after it announced higher-than-expected spending on artificial intelligence (AI).
They fell more than 15% in after-hours trading in New York despite the tech giant revealing strong earnings numbers.
Boss Mark Zuckerberg said it would take some time for its huge AI investment to boost revenue.
Meta also said its X rival, Threads, now has more than 150 million monthly active users, increasing pressure on the Elon Musk-owned platform.
“Threads is well on its way to beating X by becoming the Twitter alternative users and advertisers long for,” said Mike Proulx, of analysts Forrester.
AI features
Meta has updated its ad buying products with AI tools to boost revenue growth.
It has also introduced more AI features on its social media platforms, such as chat assistants.
The firm said it now expected to spend between $35 billion and $40 billion. (£28-32bn) in 2024, up from a previous forecast of $30-$37bn.
For investors, that outweighed the positive earnings news.
First-quarter revenue rose 27% to $36.46 billion, while analysts had expected earnings of $36.16 billion.
However, analysts said there was a logic to Meta’s approach.
Sophie Lund-Yates, of Hargreaves Lansdown, said Meta’s “substantial investment” in artificial intelligence had helped it get people to spend time on its platforms, so advertisers were willing to spend more money “at a time when Uncertainty about digital advertising is widespread”.
More than 50 countries are due to hold elections this year, she said, “which increases the uncertainty enormously” and could spook advertisers.
Ms Lund-Yates said that “looking further ahead, the biggest risk (for Meta) remains regulatory”.
And in February of this year, Meta CEO Mark Zuckerberg faced fierce criticism from US lawmakers and was pressured to apologize to families of victims of child sexual exploitation.
Lund-Yates added that the firm has “more than enough resources to take on legal challenges, but that does not rule out the risk of ups and downs in market sentiment”.
