Meta Platforms (META) stock fell about 7% after the company’s latest quarterly report showed higher AI spending and slower user growth than in the prior quarter.
The company also called out two other challenges facing its business in its earnings report, which together pressured the stock in extended trading.
The first is costs — namely, costs related to its artificial intelligence investments. Meta raised the range for its expected capital expenditures this year to $125 billion-$145 billion, up $10 billion from January on both the high and low ends, citing “expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity.”
Meta’s increased investment is, in part, about the opportunity presented by AI. But it is also a result of higher prices across a number of inputs — chips, raw materials, land, permitting — that go into this build-out. Inflation isn’t only a household phenomenon.
The second challenge is regulatory. In its earnings statement, the company wrote, “We continue to monitor active legal and regulatory matters, including headwinds in the EU and the U.S. that could significantly impact our business and financial results.
“For example, we continue to see scrutiny on youth-related issues and have additional trials scheduled for this year in the U.S., which may ultimately result in a material loss.”
A New Mexico jury ordered Meta to pay a $375 million penalty after finding that it misled users about the safety of its platforms and endangered children.
In a similar case in Los Angeles, a jury found the company negligent for designing a social media platform that was harmful to minors. Meta was ordered to pay $4.2 million in damages.
For a company that just reported operating income of $22.8 billion in its latest quarter, the dollar amounts are immaterial. But the fact that the rising threat of a persistent and growing legal headache for Meta is getting nearly top billing in its earnings release shows the potential scale of the problem for the company down the road.
Click here for the latest technology news that will impact the stock market
Read the latest financial and business news from Yahoo Finance
