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Shares in Meta, the company behind Facebook, WhatsApp and Instagram, plunged after the company announced higher-than-expected spending on artificial intelligence (AI).
Shares fell more than 15% in after-hours trading in New York even as the tech giant disclosed strong results.
President Mark Zuckerberg said it will take time for the company's massive AI investments to increase returns.
Meta also said that X rival Threads now has more than 150 million monthly active users, increasing pressure on the Elon Musk-owned platform.
“Threads is on track to beat X by becoming the Twitter alternative that users and advertisers have been waiting for,” said analyst Mike Proulx of Forrester.
AI function
Meta has been updating its ad buying products using AI tools to drive revenue growth.
We are also introducing more AI features to our social media platforms, including chat assistants.
The company said it expected spending to be between $35 billion and $40 billion (£28 billion to £32 billion) in 2024, up from its previous forecast of $30 billion to $37 billion.
For investors, that was more important than the positive news on earnings.
First-quarter sales rose 27% to $36.46 billion, compared to analysts' expectations of $36.16 billion.
But analysts said Mehta's approach has a point.
Hargreaves Lansdown's Sophie Lund-Yates said Meta's “significant investment” in AI will help people spend more time on its platform, and that advertisers are facing the “uncertainty of digital advertising”. He said he was willing to spend more money “at a time when sex is still prevalent.”
More than 50 countries have elections scheduled this year, which could cause “a lot of uncertainty” and surprise advertisers, he said.
“Looking further ahead, the biggest risks are [for Meta] The regulations remain in place.”
And in February, Meta CEO Mark Zuckerberg faced intense criticism from US lawmakers and was forced to apologize to the families of child sexual exploitation victims.
Lund Yates added that the company has “sufficient resources to pursue a legal challenge, but that does not eliminate the risk of fluctuations in market sentiment.”
