Meta stock drops 10% as heightened AI spending overshadows strong third-quarter results
Meta’s CEO Mark Zuckerberg attends the Senate Judiciary Committee hearing on online child sexual exploitation at the U.S. Capitol, in Washington, U.S., January 31, 2024.
Nathan Howard | Reuters
Meta Platforms‘ stock dropped more than 10% on Thursday as skepticism about the payoff from its aggressive artificial intelligence spending plans overshadowed strong results.
The social media giant lifted its 2025 capital expenditures guidance as it races against competitors to build out advanced AI tools. Meta now expects capex to range between $70 billion and $72 billion, versus prior guidance of $66 billion to $72 billion.
CEO Mark Zuckerberg defended the company’s ambitious spending plans during the earnings call Wednesday.
“It’s pretty early, but I think we’re seeing the returns in the core business,” he said. “That’s giving us a lot of confidence that we should be investing a lot more, and we want to make sure that we’re not underinvesting.”
Zuckerberg said the company is “aggressively” preemptively building up capacity to prepare for the arrival of superintelligence, where Meta will be “ideally positioned for a generational paradigm shift in many large opportunities.”
Like its peers, Meta has shelled out billions to beef up its AI offerings in an increasingly competitive landscape — and it isn’t the only one. On Wednesday, Alphabet boosted its capex forecast to $91 billion to $93 billion, and Microsoft said it expects heightened spending growth this fiscal year.
Earlier this year, Meta invested $14.3 billion in AI startup Scale AI and lured its CEO, Alexandr Wang, to lead its AI initiative called Superintelligence Labs with former GitHub CEO Nat Friedman.
Meta has also inked several new cloud deals to build out AI infrastructure.
For the third quarter, Meta reported adjusted earnings of $7.25 per share on $51.24 billion in revenue and topped Wall Street’s estimates.
Revenue grew 26% from a year ago and the company reported a $15.93 billion tax charge from the rollout of President Donald Trump‘s One Big Beautiful Bill Act.
— CNBC’s Jonathan Vanian contributed reporting
WATCH: Meta reports Q3 earnings beat, company takes one-time tax charge
Cheng Xin | Getty Images
Okta on Tuesday topped Wall Street’s third-quarter estimates and issued an upbeat outlook, but shares fell as the company did not provide guidance for fiscal 2027.
Shares of the identity management provider fell more than 3% in after-hours trading on Tuesday.
Here’s how the company did versus LSEG estimates:
- Earnings per share: 82 cents adjusted vs. 76 cents expected
- Revenue: $742 million vs. $730 million expected
Compared to previous third-quarter reports, Okta refrained from offering preliminary guidance for the upcoming fiscal year. Finance chief Brett Tighe cited seasonality in the fourth quarter, and said providing guidance would require “some conservatism.”
Okta released a capability that allows businesses to build AI agents and automate tasks during the third quarter.
CEO Todd McKinnon told CNBC that upside from AI agents haven’t been fully baked into results and could exceed Okta’s core total addressable market over the next five years.
“It’s not in the results yet, but we’re investing, and we’re capitalizing on the opportunity like it will be a big part of the future,” he said in a Tuesday interview.
Revenues increased almost 12% from $665 million in the year-ago period. Net income increased 169% to $43 million, or 24 cents per share, from $16 million, or breakeven, a year ago. Subscription revenues grew 11% to $724 million, ahead of a $715 million estimate.
For the current quarter, the cybersecurity company expects revenues between $748 million and $750 million and adjusted earnings of 84 cents to 85 cents per share. Analysts forecast $738 million in revenues and EPS of 84 cents for the fourth quarter.
Returning performance obligations, or the company’s subscription backlog, rose 17% from a year ago to $4.29 billion and surpassed a $4.17 billion estimate from StreetAccount.
This year has been a blockbuster period for cybersecurity companies, with major acquisition deals from the likes of Palo Alto Networks and Google and a raft of new initial public offerings from the sector.
Okta shares have gained about 4% this year.
WATCH: Earnings will drive small cap outperformance, says Bank of America’s Jill Carey Hall
Marvell Technology Group Ltd. headquarters in Santa Clara, California, on Sept. 6, 2024.
David Paul Morris | Bloomberg | Getty Images
Semiconductor company Marvell on Tuesday announced that it will acquire Celestial AI for at least $3.25 billion in cash and stock.
The purchase price could increase to $5.5 billion if Celestial hits revenue milestones, Marvell said.
Marvell shares rose 13% in extended trading Tuesday as the company reported third-quarter earnings that beat expectations and said on the earnings call that it expected data center revenue to rise 25% next year.
The deal is an aggressive move for Marvell to acquire complimentary technology to its semiconductor networking business. The addition of Celestial could enable Marvell to sell more chips and parts to companies that are currently committing to spend hundreds of billions of dollars on infrastructure for AI.
Marvell stock is down 18% so far in 2025 even as semiconductor rivals like Broadcom have seen big valuation increases driven by excitement around artificial intelligence.
Celestial is a startup focused on developing optical interconnect hardware, which it calls a “photonic fabric,” to connect high-performance computers. Celestial was reportedly valued at $2.5 billion in March in a funding round, and Intel CEO Lip-Bu Tan joined the startup’s board in January.
Optical connections are becoming increasingly important because the most advanced AI systems need those parts tie together dozens or hundreds of chips so they can work as one to train and run the biggest large-language models.
Currently, many AI chip connections are done using copper wires, but newer systems are increasingly using optical connections because they can transfer more data faster and enable physically longer cables. Optical connections also cost more.
“This builds on our technology leadership, broadens our addressable market in scale-up connectivity, and accelerates our roadmap to deliver the industry’s most complete connectivity platform for AI and cloud customers,” Marvell CEO Matt Murphy said in a statement.
Marvell said that the first application of Celestial technology would be to connect a system based on “large XPUs,” which are custom AI chips usually made by the companies investing billions in AI infrastructure.
On Tuesday, the company said that it could even integrate Celestial’s optical technology into custom chips, and based on customer traction, the startup’s technology would soon be integrated into custom AI chips and related parts called switches.
Amazon Web Services Vice President Dave Brown said in a statement that Marvell’s acquisition of Celestial will “help further accelerate optical scale-up innovation for next-generation AI deployments.”
The maximum payout for the deal will be triggered if Celestial can record $2 billion in cumulative revenue by the end of fiscal 2029. The deal is expected to close early next year.
In its third-quarter earnings on Tuesday, Marvell earnings of 76 cents per share on $2.08 billion in sales, versus LSEG expectations of 73 cents on $2.07 billion in sales. Marvell said that it expects fourth-quarter revenue to be $2.2 billion, slightly higher than LSEG’s forecast of $2.18 billion.
WATCH: Nvidia GPUs to Google TPUs: Breaking down all the AI chips
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024