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Mark Zuckerberg said Meta's many artificial intelligence bets showed “strong momentum” as quarterly sales and profits beat Wall Street expectations, but he predicted the corporate's AI spending boom will speed up next 12 months.
Investor response to Wednesday's earnings release was muted, as Meta said it expected “significant” growth in capital spending in 2025 given ongoing investments in operating costly AI infrastructure, and booked big losses at Reality Labs, its arm for virtual and augmented reality.
Meta stocks, which have risen greater than 70 percent in 2024 to recent record highs, fell about 4 percent on Thursday.
Chief Executive Mark Zuckerberg has invested in AI to enhance Meta's promoting offerings and content feeds and has begun integrating generative AI tools into the platform, diverting the corporate from its losing bet on constructing a metaverse after alarm from investors filled with avatars.
But given the high cost of running servers and data centers to develop cutting-edge technology and competition from rivals like Google, he continues to be under pressure to indicate he can monetize the initiatives.
Third-quarter revenue rose 19 percent to $40.6 billion, at the highest end of the guidance range and just above Wall Street estimates of $40.3 billion. Net income rose 35 percent to $15.7 billion, well above the consensus estimate of a rise to $13.6 billion. The variety of each day energetic users of your complete app family rose by 5 percent to three.3 billion.
In a call with analysts, Zuckerberg said it was “clear that there are a lot of latest opportunities to leverage latest AI advances to speed up our core business, which must have a robust return on investment over the following few years, so I believe that we should always invest more there”.
Already this 12 months, he said improvements to the platform's AI-driven feed and video recommendations had increased time spent on Facebook and Instagram by 8 and 6 percent, respectively.
Adding the content from friends and creators that users on Facebook and Instagram typically see, Zuckerberg said he expected Meta so as to add “an entire latest category of content in the long run, which is AI-generated or AI-aggregated content.” are”, and that this “is at the start”. to check various things around this topic”.
Zuckerberg said adoption of Meta AI, the corporate's chatbot, is increasing amongst users, as is adoption of the corporate's open, large-scale language model Llama amongst businesses and developers. Llama is trained on a cluster of 100,000 AI chips called H100s, which is “larger than anything I've seen of anyone else's activity,” he added.
Zuckerberg also noted the recent excitement surrounding his AI-powered glasses, a part of a partnership with Ray-Ban glasses. The Meta CEO recently redoubled his efforts to construct augmented reality glasses in the assumption that headsets will likely be the following computing platform, unveiling a prototype called “Orion” to much fanfare.
On Wednesday, the corporate said Reality Labs posted third-quarter revenue of $270 million and an operating lack of $4.4 billion. It added that it expected Reality Labs' full-year operating losses to “increase significantly” in comparison with the previous 12 months.
Earlier this month, the Financial Times reported that Meta was restructuring certain teams at WhatsApp, Instagram and Reality Labs, including shedding some employees and relocating others.
Youssef Squali, head of web and media equity research at Truist Securities, said: “Meta has turn into more confident in its ability to leverage AI and (machine learning) in its (apps) and can rely more heavily on infrastructure investments to support it.” AI Roadmap,” but added that the stock “outdid itself.”
Looking ahead to 2025, Chief Financial Officer Susan Li said the corporate is prioritizing further investments in point of fact labs, monetization, infrastructure and generative AI and can “really deal with streamlining our operations elsewhere.”
The company expects fourth-quarter revenue within the range of $45 billion to $48 billion. According to S&P Capital IQ, the consensus estimate was $46.2 billion.
The company raised the low end of its full-year 2024 capital spending forecast by $1 billion to $38 billion to $40 billion and predicted a “significant acceleration in infrastructure spending growth” next 12 months on account of “higher growth in infrastructure spending.” Depreciation and operating costs of our expanded investments”. infrastructure fleet”.
Capital spending was $9.2 billion within the third quarter, but the corporate said there have been delays in server shipments, which can now be paid for within the fourth quarter, explaining the likely increase in spending there.
