Meta sees AI spending accelerating and returns best forecast

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Mark Zuckerberg said Meta’s numerous bets on artificial intelligence are showing “strong momentum” as quarterly revenue and profits beat Wall Street expectations, but the company’s AI spending will continue to grow in the next year. I expected it to accelerate.

Meta expects capital spending to increase “significantly” in 2025 given continued investment in operating expensive AI infrastructure, with a huge investment in virtual reality and augmented reality division Reality Labs. Investors’ reaction to Wednesday’s results was muted, as the company said it had booked a loss.

Meta stock, which is up more than 70% to its recent high in 2024, was down about 4% on Thursday.

CEO Mark Zuckerberg is investing in AI to improve Meta’s ad service and content feed, and after investors’ alarm, he plans to integrate generative AI tools into Meta’s platform. , pivoting the company away from a money-losing bet to build a metaverse full of avatars.

But given the high costs of running servers and data centers to develop cutting-edge technology and competition from rivals such as Google, he must show he can monetize the effort. We still face this pressure.

Third-quarter sales rose 19% to $40.6 billion, at the high end of the guideline range and slightly ahead of Wall Street expectations of $40.3 billion. Net income rose 35% to $15.7 billion, well above the consensus estimate of $13.6 billion. Daily active users across the app family increased 5% to 3.3 billion.

“There are a lot of new opportunities to take advantage of new AI advances to accelerate core businesses that should have high returns over the next few years,” Zuckerberg said on a conference call with analysts. I think it should be done because it’s obvious.” Please invest more there. ”

Already this year, he said, the platform’s AI-driven improvements to feed and video recommendations have increased time spent on Facebook and Instagram by 8% and 6%, respectively.

In addition to content from friends and creators that Facebook and Instagram users typically see, Zuckerberg said that in the future Meta will “add a whole new category of AI-generated content or AI-summarized content.” ” and said that he thought it was “starting.” To test different things regarding this. ”

Zuckerberg said adoption of Meta AI, the company’s chatbot, is increasing among users, as is Llama, the company’s open large-scale language model by businesses and developers. Llama is trained on a cluster of 100,000 AI chips called H100, which is “larger than anything I’ve ever been told anyone is doing,” he added.

Zuckerberg also pointed to recent excitement around AI-powered glasses as part of a partnership with Ray-Ban Eyewear. Meta’s CEO recently made a splash by further ramping up development of augmented reality glasses, unveiling a prototype called “Orion,” believing that headsets will become the next computing platform.

The company announced Wednesday that Reality Labs had revenue of $270 million in the third quarter and an operating loss of $4.4 billion. He added that he expects Reality Lab’s full-year operating loss to be “significantly higher” than last year.

Earlier this month, the Financial Times reported that Mehta was restructuring some teams at WhatsApp, Instagram and Reality Labs, cutting some jobs and reassigning others.

“Meta is gaining confidence in its ability to leverage AI and (machine learning) across its (apps) and is making infrastructure investments to support this,” said Youssef Squali, head of internet and media equity research at Trust Securities. There will be more emphasis on “AI Roadmap,” but added that the stock is “ahead of the curve.”

Looking ahead to 2025, Chief Financial Officer Susan Lee said the company is prioritizing further investments in Reality Labs, monetization, infrastructure and generative AI, and is “focusing on streamlining operations in other areas.” “I will.”

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The company expects fourth-quarter sales to be in the range of $45 billion to $48 billion. The consensus estimate was $46.2 billion, according to S&P Capital IQ.

The lower limit of the full-year capital investment forecast for 2024 has been raised by $1 billion to $38 billion to $40 billion, and next year, “infrastructure spending will grow significantly due to higher growth in depreciation and operating expenses after business expansion.” We expect it to accelerate.” Infrastructure Fleet”.

Capital spending was $9.2 billion in the third quarter, but the company said there were delays in server deliveries and payments for those will be made in the fourth quarter, explaining the potential for a sharp increase in spending. are.