Meta Earnings: Another Potential Investment Surge Overshadows Solid Growth

Meta posted a solid first quarter, with revenue growth and management’s second-quarter outlook—while modestly disappointing relative to FactSet consensus—putting the firm on a path to exceed our 2024 revenue expectations. However, the firm increased its budget for both full-year operating expenses and capital spending, with CEO Mark Zuckerberg convinced that the firm should “invest significantly more in the coming years” into artificial intelligence. Zuckerberg expects a big step up in investment before AI services generate meaningful direct revenue. After accounting for faster revenue and expense growth in our forecast, we’re leaving our fair value estimate at $400 per share. With the selloff following the earnings release, we believe the shares are fairly valued.