Meta logo is on display. Photo: The Business Times
Meta Platforms Inc. reported stronger-than-expected sales for the second quarter, highlighting how its investments in artificial intelligence (AI) are enhancing its ability to deliver more targeted and personalized advertisements. This positive news led to a 5% rise in Meta's shares in late trading.
For the quarter ending June 30, Meta, the parent company of Facebook and Instagram, reported sales of $39.1 billion. This figure exceeded analysts' expectations of $38.34 billion. The company attributes its success to the use of AI, which has improved how ads reach interested users, boosting the efficiency of its most profitable business. Meta anticipates sales for the current quarter to be between $38.5 billion and $41 billion, compared to the average forecast of $39.2 billion.
CEO Mark Zuckerberg has been focusing on expanding Meta’s data centers and computing capabilities to establish a strong presence in the AI industry. As a result, Meta revised its capital expenditure projections for the year, now expecting to spend between $37 billion and $40 billion, up by $2 billion on the lower end of its previous range.
Following this news, Meta's shares, which closed at $474.83 in New York, saw an increase in after-hours trading. The stock has already risen by 34% this year. The company’s significant investments in AI are aimed at advancing large language models, which are essential for AI chatbots. Recently, Meta unveiled its largest AI model to date, which required hundreds of millions of dollars in computing power to develop.
Investors have been keenly watching for signs that these substantial investments will positively impact Meta’s business, especially given the mixed results from Zuckerberg's other major project, the metaverse. Balancing these investments with the need for immediate financial returns has been a challenge for Meta. Despite job cuts, a $50 billion share buyback program, and the company’s first-ever quarterly dividend, Meta has made it clear that its spending will continue to increase. The company announced plans to significantly boost capital expenditures to support its AI research and product development.
“While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” Meta stated.
Early indications of success are emerging. Zuckerberg mentioned that Meta AI, the company's chatbot, is on track to become the most widely used AI assistant globally by the end of the year. However, he urged investors to remain patient, noting that the financial benefits of this technology may take years to materialize. In April, he assured that "smart investors" would recognize the long-term potential of this technology.
Zuckerberg also acknowledged the risk of potentially overspending on AI development but maintained that investing heavily now is a rational decision to avoid falling behind in what he considers the most critical technology for the next decade or more.
As of June 30, Meta had 3.27 billion users across all its apps, reflecting a 7% increase from the previous year.
