Meta’s Revenue Growth and Upbeat Guidance Help Offset AI Spending Worries

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Meta’s solid quarterly revenue growth and upbeat guidance pushed the company’s shares higher on Wednesday, as strength in its core advertising business offset Wall Street concerns about its heavy spending on artificial intelligence.

The social media giant’s revenue rose 22 percent to $39.1 billion in the past three months, beating analysts’ expectations of $38.3 billion and the high end of its own forecast of $39 billion. In the third quarter, Metadata forecast revenue of $38.5 billion to $41 billion, beating estimates that rose to $39.2 billion.

However, the company also raised its full-year capital spending guidance from $35-40 billion to $37-40 billion, as it continues to double AI Ambition.

Wall Street has been concerned about The rise in spending on AI at large tech corporations like Microsoft, given the costs of training and maintaining the model, as well as investing in the infrastructure to support it.

But CEO Mark Zuckerberg has struggled to win over investors with his AI vision, especially as he faces questions about when the company’s new AI features will be profitable and what its business model will look like. In its last quarterly results in April, Meta raised its full-year capex guidance by the highest level to boost its infrastructure and AI plans, sending shares down more than 10 percent as investors protested the added costs.

In particular, Zuckerberg is focused on developing large language models to introduce chatbot assistants like Meta AI to his platform and using AI for better ad targeting and personalization.

“We had a strong quarter and Meta AI is on track to become the most used AI assistant in the world by the end of the year,” Zuckerberg said.

Shares of Meta, up more than 35 percent this year, rose as much as 8 percent after the news was released but later pared gains to trade up about 4 percent.

Zuckerberg recently went on a roadshow, selling his company’s plan to become an AI leader, as well as a developer of smart glasses that he believes will surpass mobile devices as the next computing platform.

In a post last week, Zuckerberg said Meta’s latest open-source large language model, Llama 3.1, is now “borderline” in performance, catching up to powerful AI models from rivals like OpenAI, Google, and Anthropic. Next year, he said future Llama models will “become the most advanced in the industry.”

Meanwhile, in an interview with Nvidia CEO Jensen Huang this week, Zuckerberg said he decided to focus on building the next computing platform powered by a combination of augmented reality and AI. He said he made the decision after trying to build on closed platforms, saying “no, fuck it” in an apparent attack on Apple and its app store ecosystem.

Still, investors remain wary of big AI spending with no clear payoff. Microsoft shares fell this week even after the company reported double-digit growth in sales and earnings, as it warned that its already-increasing capex would continue to rise next year.

Meta’s expenses were $24.2 billion in the quarter, slightly higher than expected. That included a $1.4 billion charge from a lawsuit settlement with the state of Texas over claims that the company collected biometric data from millions of citizens without proper consent.

Meanwhile, capital expenditures came in at $8.47 billion, below analysts’ expectations of around $9.5 billion.

Net income at Meta — which owns platforms like Facebook, Instagram and WhatsApp — rose 73 percent to $13.5 billion, beating consensus expectations for a rise to $12.3 billion, according to data from S&P Capital IQ.