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Meta’s second-quarter revenue beat expectations. The company reported revenue of $39 billion, just ahead of the $38.2 billion anticipated by analysts polled by FactSet.
At the same time, its capital expenditures and losses resulting from its metaverse division weren’t as bad as expected. Wall Street analysts expected the company to spend $9.2 billion; it spent only $8.4 billion. Meta’s money-losing augmented and virtual reality division dedicated to progressing the capital-m Metaverse, Reality Labs, reported a loss of $4.48 billion, slightly less than the $4.54 loss forecasted.
Meta shares immediately shot up 5% on the news to almost $500.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” CEO Mark Zuckerberg said in a statement. “We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”
Investors had braced for further potential increases to Meta’s AI spending. Analysts had foreseen Meta’s capital expenditures in 2024 hitting between $35 billion and $40 billion, and the company confirmed such costs in its earnings report, but raised the minimum expected spending amount to $37 million. JPMorgan’s Doug Anmuth said in a recent research note that Meta’s spending next year could reach as high as $50 billion.
Meta confirmed that it expects “significant capital expenditures growth in 2025.”
Wall Street has been wary of hefty bills racked up by Big Tech as industry giants build out AI infrastructure and develop the latest artificial intelligence software. The Nasdaq hit its lowest point so far this year after Google and Tesla revealed their latest AI expenditures, apparently without sufficient answers for when those investments will start to pay off. Microsoft shares fell yesterday after its AI costs were higher than expected and AI sales disappointed.
But Mark Zuckerberg thinks Meta’s AI investments will begin to show their worth sooner than later. The CEO has said he thinks Meta’s recently-released Llama 3.1 will be “the most advanced in the industry” by the beginning of next year. And he’s willing to spend the money — and possibly overspend — to continue Meta’s AI advancements.
Meta’s AI advancements haven’t come without issues. The company had to hit the brakes on releasing some generative AI tools in Brazil and Europe as regulatory scrutiny of the technology heats up. The EU has been probing Meta’s advertising model, and Zuckerberg apparently doesn’t want to risk further scuffles. Brazil banned Meta from training its AI models on Brazilians’ personal data.