Meta (NASDAQ:) and IBM (NYSE:) shares plunge in pre-market trading following earnings reports and strategic announcements.

Shares of Meta Platforms and International Business Machines Corp. experienced significant declines in pre-market trading Thursday following their respective earnings reports and strategic announcements.

Meta reported a 27% year-over-year increase in revenue for the first quarter, totaling $36.46 billion, while IBM announced its acquisition of HashiCorp (NASDAQ:) for $6.4 billion, valued at $35 per share in cash.

IBM and META Shares Slide in Premarket Trading

IBM’s stock price dropped 8.35% to $168.73 in early trading after it unveiled its $6.4 billion acquisition of HashiCorp. This strategic move, valued at $35 per share in cash, is expected to fortify IBM’s position in the hybrid cloud market by harnessing HashiCorp’s infrastructure automation expertise. IBM is optimistic that this transaction will drive synergies across its key growth areas, including Red Hat, IT automation, and consulting.

Despite the strategic fit, investors appeared skeptical about the acquisition’s financial impact. IBM expects the deal to accrue to its adjusted EBITDA within the first full year after closing and to contribute positively to free cash flow in the second year.

Meanwhile, Meta’s shares tumbled 13.21% to $428.33 in pre-market trading despite reporting a 27% year-over-year increase in revenue for the first quarter, totaling $36.46 billion. The social media giant’s strong earnings were overshadowed by concerns over its projected spending on (AI) technologies.

Meta’s Guidance for AI Expenditures Higher than Expected for 2024

Meta’s guidance for 2024 AI expenditures, ranging from $35 billion to $40 billion, marked a substantial increase from its previous estimate of $30 billion to $37 billion. This revision led to a sharp decline in the company’s stock price as investors weighed the potential benefits of increased AI investments against the impact on profitability and cash flow in the near term.

***

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.