Meta says it will continue spending, as growth surges

For months, Meta and other major tech companies have been investing heavily in artificial intelligence technologies, despite no immediate signs of these investments yielding profits. Throughout this period, these companies have consistently reassured stakeholders with a simple message: Trust us.

On Wednesday, Meta, the parent company of Facebook, Instagram, and WhatsApp, reaffirmed its commitment to this strategy. The company reported spending $8.5 billion in the second quarter on computing infrastructure for AI, metaverse development, and other projects—an increase of 33.4% from the previous year.

Meta also adjusted its annual spending forecast, raising it to a range of $37 billion to $40 billion, up from a previous estimate of $35 billion to $40 billion.

"We're focused on delivering the best consumer and advertising experiences," said Mark Zuckerberg, Meta's CEO, during a call with investors on Wednesday. "Achieving this requires access to cutting-edge technology, and we can't be limited by what our competitors offer."

In the second quarter, Meta's revenue reached $39.1 billion, a 22% increase from the previous year and surpassing Wall Street's expectations of $38.3 billion, according to data from FactSet. The company's profit jumped to $13.5 billion, a 73% rise from $7.8 billion a year earlier.

Meta also indicated that its advertising business remains robust. The company projected revenue of $38.5 billion to $41 billion for the current quarter, exceeding Wall Street's forecast of $39.3 billion.

Following this news, Meta's shares rose over 5% in after-hours trading, closing at $474.83.

Despite growing scrutiny over its spending, Meta has continued to expand. After the initial excitement surrounding AI, sparked by OpenAI's ChatGPT in 2022, Wall Street has begun questioning the revenue potential of this technology. These concerns are further amplified by Meta's substantial investments in virtual reality and augmented reality headsets and glasses for the metaverse.

Meta has already discontinued one AI project that failed to gain traction—AI characters modeled after Jane Austen, Snoop Dogg, MrBeast, Charli D'Amelio, and other celebrities that could interact across its messaging apps. The company had introduced these AI characters less than a year ago, and their removal was first reported by The Information.

Nevertheless, Zuckerberg remains committed to AI. Before raising the annual spending forecast on Wednesday, Meta had already increased it in April to $35 billion to $40 billion, up from a previous estimate of $30 billion to $37 billion. These adjustments are driven by significant investments in AI infrastructure, including data centers, chip designs, and research and development.

"I'd rather build capacity ahead of time than be too late," Zuckerberg remarked during Wednesday's call.

He explained that these investments not only aim to develop future technologies but also to enhance Meta's core advertising business. With AI, the company can deliver more relevant ads and videos on Facebook and Instagram, encouraging users to spend more time on its platforms.

"AI has the potential to improve all of our products in almost every aspect," Zuckerberg said.
 

Source >> https://economictimes.indiatimes.com/tech/technology/meta-says-it-will-continue-spending-as-growth-surges/articleshow/112187724.cms