Meta shows strong growth as AI spending surges
Facebook owner Meta saw net income and revenues top expectations on Wednesday as the company said it would expand investments into artificial intelligence, drawing nervousness from investors. The social media behemoth, which is also the parent company of Instagram and WhatsApp, said net profit in the third quarter was $15.7 billion -- up 35 percent on the same period last year. Revenues rose 19 percent to $40.6 billion, slightly higher than analyst estimates.
AI Investments and Outlook
Meta's founder and chief executive Mark Zuckerberg announced that the company will continue to heavily invest in artificial intelligence. He mentioned that AI investments require significant infrastructure, and Meta plans to allocate a substantial budget towards this direction. Despite the positive financial results, Meta's share price slipped nearly three percent after the earnings report was released.
Focus on Artificial Intelligence
Like other major tech companies, Meta is prioritizing artificial intelligence to diversify its revenue streams beyond social media. Mark Zuckerberg has been directing attention and resources towards AI innovations such as chatbots and ad tech enhancements across Meta's platforms. The company has raised its capital investment outlook, with a forecast between $38-40 billion for 2024, much of which is allocated for AI development.
Challenges and Opportunities
Investors expressed concerns about the rising costs associated with Meta's AI investments. While the company's core ad business continues to perform well, there are uncertainties about the timeline for these investments to pay off. Analysts believe that Meta's strong revenue growth will help mitigate worries about AI spending, particularly with advancements in ad placement capabilities.
Meta's foray into consumer-facing AI technologies, such as augmented reality glasses like Orion and smart glasses like Ray-Ban Meta, has generated positive reactions. These products showcase Meta's potential in the AI wearable space and are expected to be popular during the holiday season. However, the ongoing losses in the Reality Labs division, particularly in the VR sector, remain a concern for investors.
Despite these challenges, Meta's continued focus on AI innovation and product development signifies its commitment to staying at the forefront of technological advancements. The company's investments in AI are aimed at enhancing user experiences and driving future growth opportunities.
While Meta's AI initiatives are receiving positive feedback, the full impact of these developments may not be fully realized until 2025 or beyond. As the company continues to invest in AI technologies, it aims to position itself as a leader in the evolving digital landscape.
