Meta, the parent company of Facebook, Instagram, and WhatsApp, surpassed market expectations with third-quarter revenue of $40.59 billion and profits of $15.69 billion, despite concerns over its substantial AI spending. CEO Mark Zuckerberg highlighted the importance of AI investments in driving sales growth and user engagement across its platforms. Although investor worries about costs persist, Meta aims to enhance its AI capabilities and connected devices, forecasting fourth-quarter sales between $45 and $48 billion.
Meta, the parent company of Facebook, Instagram, and WhatsApp, has once again surpassed market expectations during its third-quarter earnings report. The company reported $40.59 billion in revenue, marking a 19% year-over-year increase, and achieved a profit of $15.69 billion, which is 35% more than the same period last year and over two billion above analysts’ predictions. However, there are ongoing concerns among investors regarding Meta’s significant investments in artificial intelligence (AI).
During a call with analysts, CEO Mark Zuckerberg described the quarter as a “good period”, emphasizing that “AI’s long-term vision” is now a key focus. Meta already leverages AI extensively for content recommendations and targeted advertising among its vast user base, which reached 3.29 billion in September. Debra Williamson from Sonata Insights mentioned that these technological advancements have contributed to the company’s sales growth.
Increased Engagement on Platforms
Zuckerberg highlighted that over a million advertisers took advantage of Meta’s AI-driven content generation tools last month. As a result, user engagement on its platforms has risen, with an 8% increase in time spent on Facebook and a 6% increase on Instagram this year. “This solid revenue growth should alleviate some concerns regarding AI investments,” Williamson noted. Nevertheless, after the market close, Meta’s shares saw a decline of 2.60% in electronic trading.
The introduction of tools similar to ChatGPT, which allow for content creation through simple language queries, has prompted major tech firms to significantly invest in costly IT infrastructure and skilled personnel. In light of this, Meta revised its capital expenditure predictions, now estimating between $38-40 billion for 2024, an increase from the previous forecast of $37-40 billion.
Continued Investment in AI
Looking ahead to 2025, Zuckerberg emphasized the necessity for ongoing investments in AI for core operations, primarily in advertising and social engagement, with “strong returns expected in the coming years.” He acknowledged the substantial infrastructure demands tied to these investments, noting that the budget for 2025 has yet to be finalized.
Jasmine Enberg from Emarketer commented that investors anticipated clearer guidance and expressed disappointment over rising costs, realizing that it might take longer for these investments to yield returns.
Competitors leading in AI, such as Alphabet (Google) and Microsoft, have also reported results that met expectations, although concerns about their rising costs persist.
AI Assistants and Smart Glasses
In an effort to lead in the AI-enabled assistant market, Meta is focusing on engaging users through its apps via the recently updated Meta AI, which answers questions similarly to ChatGPT. Zuckerberg shared that this assistant has over 500 million active users each month. The integration of Llama 3, the latest iteration of Meta’s AI model, has enhanced Meta AI’s capabilities, placing it alongside GPT-4 (OpenAI) and Gemini (Google).
Zuckerberg also indicated that development on Llama 4 is “well advanced” and anticipates that “lighter” versions will be available “early next year.” Additionally, Meta is exploring the creation of connected glasses through a partnership with EssilorLuxottica, the company behind the Ray-Ban brand.
Analysts predict that the latest Meta Ray-Bans, available for several years now, are likely to be on many holiday wish lists this year. The company projects revenue between $45 billion and $48 billion for the fourth quarter.
In September, Meta showcased a prototype called Orion, featuring a camera, headphones, a voice-activated AI assistant, and mini projectors capable of displaying videos or holograms of people.