Meta is the fastest growing project in AI spending after results beat Wall Street’s targets via Reuters
Written by Katie Paul, Akash Sriram
(Reuters) – Facebook owner Meta Platforms (NASDAQ: ) on Wednesday warned of a “significant acceleration” in artificial intelligence-related infrastructure spending next year, while beating analysts’ estimates with third-quarter earnings.
The results sent mixed signals to investors about whether digital ad sales from Meta’s main social media business will continue to cover the cost of building its massive AI.
Shares of the Menlo Park, California-based company fell 2.9% in after-hours trading.
“Meta needs to prove it can continue to cover its AI costs as they ramp up next year, and any weakness in its core ad business could make investors nervous as they continue to wait for a return on Meta’s AI bet,” said the Emarketer principal. commentator Jasmine Enberg.
Like its Big Tech peers, Meta has invested heavily in data centers to capitalize on the productive AI boom. Unlike cloud service providers, however, it does not expect to earn money from that investment immediately and is therefore subject to scrutiny by investors regarding its use.
Meta’s chief executive, Mark Zuckerberg, admitted on a conference call with analysts that additional infrastructure spending “may not be what investors want to hear in the near term,” but said the company will continue to invest anyway.
“I think the opportunities are really big,” he said.
Zuckerberg added that Meta AI, a productive conversational AI assistant that can generate images and answer questions, now has more than 500 million monthly active users. That represents a huge jump from the 400 million users the company said were using Meta AI since it was last disclosed in September.
The world’s largest social media company kept expenses flat in the third quarter, with total expenses of $23.2 billion and capital expenses of $9.2 billion. It also presented a slightly improved spending picture for this year, lowering its forecast for total spending by $96 billion to $98 billion.
In its press release, however, it warned of “higher acceleration in infrastructure spending growth next year as we see higher growth in depreciation and operating costs for our expanded infrastructure fleet.”
Investors have been keeping an eye on Meta’s performance in recent months. Its shares sank in April after it revealed a higher-than-expected cost forecast, knocking $200 billion off its stock market value.
That wiped out a number of strong points for Meta, which rebounded from a price cut in 2022 by cutting its workforce, relying on investor enthusiasm for AI and earlier this year posted its first-ever profit.
The company’s shares are up nearly 500% from the bottom and about 67% so far this year.
On Wednesday, analysts again questioned Meta about its figure, which stood at 72,404, up from 66,185 in the previous year’s quarter.
Chief Financial Officer Susan Li said Meta will focus on pushing parts of the company “to be more efficient,” including those that continue to add employees.
Meta’s gains come after encouraging results from digital ad bellwethers Alphabet (NASDAQ: ) and Snap, both of which beat third-quarter revenue estimates on Tuesday thanks in part to growing sales of AI-assisted ads.
Meta reported third-quarter earnings of $6.03 per share, compared with estimates of $5.25 per share, according to data compiled by LSEG. Third-quarter revenue stood at $40.59 billion, compared with analysts’ estimates of $40.29 billion.
The company also forecast between $45 billion and $48 billion in fourth-quarter revenue, compared with analysts’ estimates of $46.31 billion, according to data from LSEG.
Advertising accounts for a large portion of Meta’s revenue, meaning higher sales spend by retailers and other businesses during the holiday season could provide a significant boost to the company’s bottom line, analysts said.
Meta’s daily active people (DAP), a metric it uses to track unique users who open any of its apps per day, grew 5% in the third quarter to 3.29 billion. DAP increased by 7% in the previous June quarter, reaching 3.27 billion.
The company is well-positioned to extract more revenue from users as user growth slows, as its AI tools can show people more content that matches their interests, Enberg said.
The company’s Reality Labs division, which makes its Quest virtual reality headsets, EssilorLuxottica’s Ray-Ban smart glasses and upcoming augmented-reality glasses, lost $4.4 billion in the third quarter, narrower than analysts’ estimates of a billion-dollar loss. -4.7.
When considering Reality Labs’ 2025 investment, executives were excited about the progress and strong consumer interest they’d seen especially in smart glasses, Li said.
