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For two years, Meta's earnings story has been the same. Spend more on AI, get rewarded for it. On Wednesday, the company spent less than expected, and the stock dropped 7%.
The miss on user growth did not help. Meta said Q1 Daily Active People (DAP) fell more than 5% from the prior quarter, partly because of "internet disruptions in Iran" and restrictions on WhatsApp in Russia.
Meta beat on the headline numbers. Q1 EPS came in at $7.31 adjusted versus a $6.79 estimate, and revenue hit $56.31 billion versus $55.45 billion expected. Revenue grew 33% from $42.3 billion a year earlier, the fastest quarter for growth since 2021.
The catch was capex. The company reported $19.84 billion in capital spending versus a $27.57 billion average estimate. That is a big miss given how closely investors track Meta's AI infrastructure spend.
Meta tried to soften the underspend. The company raised its full-year capex range to $125 billion to $145 billion, up from a prior $115 billion to $135 billion, citing higher component pricing and additional data center costs.
Meta reported Q1 Daily Active People of 3.56 billion. That is a 4% increase year over year, but a more than 5% drop from the fourth quarter. Wall Street was modeling 3.62 billion.
The company pointed to two specific factors: the war in Iran, where internet access has been disrupted, and a restriction on WhatsApp access in Russia. Both lowered active user counts in those regions.
Even with the explanation, a quarter-over-quarter drop in users is a flag for investors used to steady growth.
Meta's net income jumped to $26.8 billion ($10.44 per share), up from $16.6 billion ($6.43 per share) a year earlier. Inside that figure was an $8.03 billion income tax benefit tied to the Trump administration's tax and spending bill. Without that benefit, EPS would have been $3.13 lower.
Q2 revenue guidance came in roughly in line, with Meta projecting $58 billion to $61 billion versus a $59.5 billion estimate.
Meta said its multiple youth-safety legal cases "may ultimately result in a material loss." The company suffered two trial losses in March on related issues. It also confirmed plans to lay off about 10% of its workforce, or 8,000 employees, while cutting 6,000 unfilled roles. The next data point is the Q2 capex print, where investors will check whether the new full-year range actually translates into spending.
