Meta (META) may have surprised analysts yesterday (Oct. 30) with stronger quarterly results than expected. But despite bringing in record revenue bolstered by its core ad business, the tech giant’s ambitious plans to significantly ramp up its spending on A.I. bets—many of which have yet to directly pay off—also stoked investor fears. The company’s shares fell by more than 1 percent today (Oct. 31).
The social media giant reported record revenue of $40.5 billion for the July-September quarter, representing a 19 percent year-over-year increase. Net income rose 35 percent to $15.6 billion for the quarter. Both figures beat analyst estimates. The company expects this momentum to continue into the current quarter, predicting revenue to reach somewhere between $45 billion and $48 billion, said CFO Susan Li.
Almost all of Meta’s revenue came from ad sales on Facebook, Instagram, Threads and WhatsApp, which totaled $39.8 billion for the quarter. Sales from its Reality Labs division—which encompasses the company’s virtual reality headsets and Ray-Ban smart glasses—came in lower than Wall Street’s expectations at $270 million, although representing a 28 percent increase year-over-year. Reality Labs reported an operating loss of $4.4 billion, which was narrower than analysts had predicted.
Like its Big Tech rivals, Meta is attempting to stake out a role of dominance in the A.I. revolution. The company earlier this year released Meta A.I., a generative A.I. assistant integrated across its products and apps that has already racked up 500 million users. And in September, it unveiled Llama 3.2 as its first open-source multimodal A.I. model. “This might be the most dynamic moment I’ve seen in our industry,” CEO Mark Zuckerberg said on an earnings call yesterday. “If we do well, then the potential for Meta and everyone building with us will be massive.”
As Meta’s A.I. ambition grows, so is its spending—the company reported capital expenditures of $9.2 billion between July and September, up from the $8.47 billion spent in the three-month period prior. The majority of this spending went towards data centers and related infrastructure, which have become an increasingly pertinent area of focus for tech companies looking for more compute power to power their A.I. models. “The opportunities around here are really big; we’re going to continue investing significantly in this,” said Zuckerberg.
Meta’s full-year capital expenditure is expected to reach $38 billion to $40 billion, higher than previous estimates.
Aside from developing foundational models and investing in A.I. infrastructure, Meta is also looking to integrate A.I. into its various content platforms. “We’re going to add a whole new category of content, which is A.I.-generated or A.I.-summarized content, or existing content pulled together by A.I. in some way. We’re starting to test different things,” Zuckerberg said on the earnings call.
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