Meta Platforms (NASDAQ:META) saw its stock fall 7.01% after Q1 results on Wednesday (29 April). But revenue growth was exceptionally strong.

Sales increased 33% and earnings per share were up 63%. So what did the stock market not like – and what should investors do?

Earnings overview

There are a few things investors need to note about Meta’s Q1 earnings. Let’s start at the bottom and work our way up.

The 63% increase in earnings per share was driven partly by a tax benefit, which I don’t expect to repeat. But there’s plenty to like further up. 

There’s nothing one-off about the 33% increases in sales. This was driven by the firm’s social media platforms, which continue to do well.

The number of users keeps climbing. And Meta is also finding ways to get more advertising revenues from its existing user base.

All of this is positive. But there are two major reasons the stock fell meaningfully in extended trading – and both are familiar.

One is an increase in expected capital expenditures. And the other is the potential implications of its recent legal difficulties.

Why is the stock down?

Meta increased its capital expenditure forecast for 2026 to $145bn from $125bn. That’s a bold move in a market wary about the long-term demand for data centres.

My view, however, is that investors don’t have a huge amount to worry about here. The key is that the advertising revenues are continuing to grow strongly. 

This is what allowed the firm to keep moving forward while burning cash on metaverse projects. And I think it will offer a form of protection again.

The bigger concern, in my view, is the ongoing legal issues. Meta lost a couple of cases earlier this year and there are more scheduled. 

The company warned that these might result in a material loss. And that’s something that does make me wary as an investor. 

It’s not just the potential costs that concern me. It’s a threat to Meta’s social media business – which I see as fundamental to the data centre spending.

Risk assessment

Meta shares trade at a lower price-to-earnings (P/E) multiple than the other big US tech stocks. But I’m very wary of the current risks.

I think investors often underestimate legal threats when it comes to companies like Meta. And they have some justification. 

Alphabet was found guilty of maintaining an illegal monopoly. But in the end, the company escaped any major sanctions. 

I’m not convinced Meta is the same. Young people’s online safety is a subject that a lot of individuals — rightly — feel strongly about.

As a result, I’m taking a cautious view of the stock right now. I doubt it’s going to be fatal to the firm, but I think it’s very hard to assess it accurately.

This means me buying the stock right now looks more like gambling to me than investing. And that’s not what I’m in the stock market for. 

What to do?

Not buying Meta shares at today’s prices might turn out to be my mistake. But it’s one I can live with in my own investing. 

The stock might be down, but that doesn’t automatically make it a buy. For my money, some of the other big US tech stocks are more compelling right now.