NEW YORK: Meta Platforms Inc increased its spending estimates for the year and projected second quarter sales that were below Wall Street’s expectations, once again raising questions about whether its futuristic technological bets will eventually pay off for investors.

The Facebook parent reported revenue of US$36.5bil in the first quarter, an increase of more than 27% over the same period a year ago.

It was a small beat, as analysts were looking for revenue of US$36.1bil on average, according to estimates compiled by Bloomberg. Profit more than doubled to US$12.4bil or earnings per share of US$4.71.

But the Menlo Park, California-based social networking company also projected second quarter sales of US$36.5bil to US$39bil. Analysts expected US$38.2bil.

At the same time, Meta raised its expected costs for the year, and now believes capital expenditures will be US$35bil to US$40bil.

Earlier this year, it estimated expenses related to things like servers, artificial intelligence (AI) hardware and data centres would be US$30bil to US$37bil.

“We expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts,” chief financial officer Susan Li said in a statement.

The shares tumbled 11% in extended trading. The stock was up 39% so far this year at market close and has been trading near all-time highs for the past month, in part reflecting excitement around AI.

Meta has been spending aggressively to compete on AI against other tech peers like Microsoft Corp and Alphabet Inc, which is driving some of the increase in costs.

The company announced plans for a new US$800mil data centre in January, and is also developing its own chips for AI services.

Meta is also working on several new iterations of its large language model, known as Llama, for powering chatbots and other AI services.

In the previous quarter, chief executive officer Mark Zuckerberg announced a US$50bil stock buyback in addition to the company’s first ever quarterly dividend, an effort to placate investors frustrated by the company’s aggressive spending on technologies that have yet to pay off.

Zuckerberg has spent years plowing money into efforts to build the so-called Metaverse, a virtual world where he hopes people will one day play and work.

Reality Labs, the Meta division focused on its futuristic bets, reported a loss of US$3.85bil for the first quarter, roughly the same as a year ago.

That division, which also oversees virtual reality headsets and Meta’s Ray-Ban smart glasses, reported an annual loss of more than US$16bil in 2023.

The company reiterated its broader 2024 spending plans, saying it will shell out US$96bil to US$99bil for the calendar year, up slightly from a low-end target of US$94bil to US$99bil.

 - Bloomberg