Big Tech's $200 Billion AI Gamble: Massive Investments Raise Wall Street Concerns

Big Tech is spending big on AI (NASDAQ:MSFT)

Big technology companies, including Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), are funneling billions of dollars to build artificial intelligence (AI) centers to meet ever-growing demand, without any clear indication of returns on their investments. Earlier this week, both Microsoft (

Big Tech doubles down on AI, $200 billion gamble raises concerns on Wall Street

Cutting corners: Tech executives say there are long-term benefits to their AI investments, drawing parallels to the early days of cloud technology. However, Silicon Valley's spend-first, profit-later attitude tests many investors' patience. Amazon, Microsoft, Meta, and Alphabet have invested significant sums in AI infrastructure - money that has not yielded justifiable returns at this point - to the displeasure of Wall Street. And yet Big Tech is not to be deterred. Tech giants are set to spend a staggering $200 billion on AI-related capital expenditures this year, according to Bloomberg's calculations, marking an all-time high for these companies. It is an unprecedented level of investment, ranging from securing scarce high-end chips and constructing expansive data centers to forging deals with energy providers and even reviving a controversial nuclear plant for power. Amazon is leading the charge with a projected record $75 billion in spending for 2024, as CEO Andy Jassy describes AI as a "once-in-a-lifetime opportunity." Analysts at MoffettNathanson called the sum "truly staggering." Meta is not far behind, with capital spending potentially reaching up to $40 billion in 2024, while CEO Mark Zuckerberg commits to increased investment in AI language models and futuristic projects. Alphabet has reported higher-than-expected capital expenditures and is projecting "substantial" increases in spending for 2025. Microsoft's AI-related expenses are also soaring, having spent $14.9 billion in a single quarter, a 50 percent increase from the previous year. Meanwhile, it faces challenges in meeting demand due to data center capacity constraints. Apple, while not as aggressive in its AI spending, has introduced "Apple Intelligence," a suite of AI-enhanced services, though these new AI products have not significantly impacted its financial results. Wall Street's response was mixed as the tech giants reported varied financial results this quarter. Amazon and Alphabet saw their shares soar after beating earnings expectations, largely due to strong growth in their cloud-computing divisions. However, Meta and Microsoft experienced stock declines following concerns about spending plans and cloud revenue growth projections. While some analysts remain optimistic about the long-term potential of these AI investments, concerns persist regarding the massive expenditures. JPMorgan analysts, for example, noted that Microsoft's data center supply issues might "modestly" restrict its cloud business but viewed the company's investments, particularly in OpenAI, as "planting the longer-term seeds for success." These companies are also rolling out products to justify, at least in part, the massive costs of their AI investments. Microsoft is pursuing various monetization pathways for AI, including through Azure cloud services and GitHub Copilot. Meta has said that AI is already positively impacting its core advertising business by allowing firms to create more engaging ads using AI tools, while Amazon's AWS and Google Cloud have reported significant revenue growth, partially attributed to AI services.

Meta, Microsoft lift AI spending, worrying Wall Street ahead of Amazon results

(Reuters) - Big tech including Microsoft and Meta are stepping up spending to build out AI data centers in a rush to meet vast demand, but Wall Street is hungry for a quicker payday on the billions invested. Microsoft and Meta both said on Wednesday their capital expenses were growing due to their AI investments. Alphabet, too, reported on Tuesday that these expenditures would remain elevated. Amazon, which is set to report results on Thursday, is likely to echo these forecasts. The extensive capital spending could threaten fat margins at these companies, and pressure on this metric is likely to spook investors. Big tech shares fell in after-hours trading on Wednesday, highlighting the challenges the companies face as they seek to balance ambitious AI pursuits with the need to reassure investors they are focused on short-term results. Meta's stock fell 2.9% in after-hours trading, and Microsoft's stock price fell 3.6%, despite each topping profit and revenue expectations for the July-September period. Amazon stock also dipped. "It's costly to run AI technology. Getting capacity is expensive," said GlobalData analyst Beatriz Valle. "It has become a competitive race among the big tech companies to build out capacity. It's going to take time to see the returns, to see widespread adoption of the technology." Microsoft's capital spending for a single quarter now is more than its annual expenditure used to be until fiscal 2020, according to Visible Alpha. For Meta, a quarter's worth of spending is in line with what they spent in a year until 2017. Microsoft said capital spending rose 5.3% to $20 billion in its first fiscal quarter, and predicted increased spending on AI in the second. But growth at its key cloud business Azure is likely to slow, it warned, blaming capacity constraints at its data centers. "I think what investors are missing is that for every year Microsoft overinvests - like they have this year - they're creating a whole percentage point of drag on margins for the next six years," said Gil Luria, head of technology research at D.A. Davidson. Meta, meanwhile, warned of "significant acceleration" in artificial intelligence-related infrastructure expenses next year. BOTTLENECKS IMPEDE GROWTH Capacity constraints are rippling through the tech industry. Chipmakers including powerhouse Nvidia are struggling to keep up, in turn making it harder for cloud companies to build out capacity. Advanced Micro Devices, which reported results earlier this week, said demand for AI chips was rising much faster than supply, limiting its ability to tap the order surge. It warned that supply of AI chips would be tight going into next year. Despite the concerns, Meta and Microsoft said it was still very early in the AI cycle and emphasized the long-term potential of AI. The investments are reminiscent of when Big Tech was developing cloud businesses and waiting for customers to embrace the technology. "Building out the infrastructure is maybe not what investors want to hear in the near term, but I think the opportunities here are really big," said Meta CEO Mark Zuckerberg during Wednesday's earning call. "We're going to continue investing significantly in this." (Reporting by Anna Tong in San Francisco, and Aditya Soni and Deborah Sophia in Bengaluru; Editing by Sayantani Ghosh and Sonali Paul)

Tech Giants Are Set to Spend $200 Billion This Year Chasing AI

(Bloomberg) -- Three months ago, Wall Street punished the world's largest technology firms for spending enormous amounts to develop artificial intelligence, only to deliver results that failed to justify the costs. Silicon Valley's response this quarter? Plans to invest even more. The capital expenditures of the four largest internet and software companies -- Amazon.com Inc., Microsoft Corp., Meta Platforms Inc. and Alphabet Inc. -- are set to total well over $200 billion this year, a record sum for the profligate collective. Executives from each company warned investors this week that their splurge will continue next year, or even ramp up. The spree underscores the extreme costs and resources consumed from the worldwide boom in AI ignited by the arrival of ChatGPT. Tech giants are racing to secure the scarce high-end chips and build the sprawling data centers the technology demands. To do so, the companies have cut deals with energy providers to power these facilities, even reviving a notorious nuclear plant. They're each trying to convince Wall Street that these huge investments will make their future businesses more profitable than the current ones selling digital ads, goods and software. On an investor call on Thursday, Andy Jassy, Amazon's chief executive, called AI a "really unusually large, maybe once-in-a-lifetime type of opportunity," evidenced by his company's projection for a record $75 billion in spending for 2024. "I think our customers, the business, and our shareholders will feel good about this long term -- that we're aggressively pursuing it." Analysts at MoffettNathanson called Amazon's spending "truly staggering." A day earlier, Meta CEO Mark Zuckerberg pledged to ramp up investing in AI language models and other futuristic projects he now frames as core to his company's future. Meta's capital spending may climb as high as $40 billion this year. Meanwhile, Alphabet's capex budget came in higher than Wall Street expectations, and its Chief Financial Officer Anat Ashkenazi projected "substantial" increases in 2025. Apple Inc. has also vowed to invest in AI, introducing a suite of services, like a more capable Siri, called Apple Intelligence. But its relatively weak financial results this quarter weren't helped by its new AI products, which mostly hadn't arrived. Financial results for the tech giants this week were a mixed bag. Shares of Amazon and Google parent Alphabet soared after the companies beat earnings expectations, largely on the strength of growth in their cloud-computing units. But Meta and Microsoft fell after the former's spending plans caused jitters, and the latter's outlook for cloud revenue growth disappointed. Alphabet, Microsoft and Meta were all up slightly in premarket trading on Friday, while Amazon rose 6.7% before New York exchanges opened. Apple declined in early trading by about 1.1%. For Microsoft, its lackluster quarterly performance came not because customers weren't lining up to pay for its cloud and AI offerings but because the company couldn't build capacity quickly enough. "This demand all showed up pretty fast," CEO Satya Nadella told investors in a call on Wednesday. Data centers, he added, "don't get built overnight." Microsoft spent $14.9 billion in the quarter, a 50% rise from last year -- and an amount higher than the company had ever spent on property and equipment in a single year before 2020. CFO Amy Hood told investors Microsoft will work to put its data center supply issue in a "more balanced position." Analysts were broadly optimistic that Microsoft's data center supply difficulties will eventually be straightened out. The issue will "modestly" restrict Microsoft's cloud business, but the company's investments, particularly its large stake in OpenAI, are "planting the longer-term seeds for success," JPMorgan analysts wrote in a note after the company's results. Wall Street's concern with runaway spending isn't going away. This week Meta reported $4.4 billion in operating losses for Reality Labs, its division that makes augmented reality glasses and other gadgets far from commercial success. The company has also spent heavily to make its Llama models that aim to compete with Google and OpenAI. On the Meta earnings call, Zuckerberg argued that these AI investments are improving the company's primary business of selling ads on Facebook and Instagram. But investors will remain nervous about any signs of weakness in the ads business "as they continue to wait for a return on Meta's bigger AI bets," said Jasmine Enberg, principal analyst for Emarketer. Still, Meta's stock is up 60% this year. And some analysts said Zuckerberg's big spending will pay off down the line. "Of course, history is on his side," MoffettNathanson wrote in their report, "and investors now have been trained that patience here is a virtue." --With assistance from Subrat Patnaik and Henry Ren.

Meta, Microsoft lift AI spending, worrying Wall Street ahead of Amazon results

The extensive capital spending could threaten fat margins at these companies, and pressure on this metric is likely to spook investors. Big tech shares fell in after-hours trading on Wednesday, highlighting the challenges the companies face as they seek to balance ambitious AI pursuits with the need to reassure investors they are focused on short-term results.Big tech including Microsoft and Meta are stepping up spending to build out AI data centers in a rush to meet vast demand, but Wall Street is hungry for a quicker payday on the billions invested. Microsoft and Meta both said on Wednesday their capital expenses were growing due to their AI investments. Alphabet , too, reported on Tuesday that these expenditures would remain elevated. Amazon, which is set to report results on Thursday, is likely to echo these forecasts. The extensive capital spending could threaten fat margins at these companies, and pressure on this metric is likely to spook investors. Big tech shares fell in after-hours trading on Wednesday, highlighting the challenges the companies face as they seek to balance ambitious AI pursuits with the need to reassure investors they are focused on short-term results. Meta's stock fell 2.9% in after-hours trading, and Microsoft's stock price fell 3.6%, despite each topping profit and revenue expectations for the July-September period. Amazon stock also dipped. "It's costly to run AI technology. Getting capacity is expensive," said GlobalData analyst Beatriz Valle. "It has become a competitive race among the big tech companies to build out capacity. It's going to take time to see the returns, to see widespread adoption of the technology." Microsoft's capital spending for a single quarter now is more than its annual expenditure used to be until fiscal 2020, according to Visible Alpha. For Meta, a quarter's worth of spending is in line with what they spent in a year until 2017. Microsoft said capital spending rose 5.3% to $20 billion in its first fiscal quarter, and predicted increased spending on AI in the second. But growth at its key cloud business Azure is likely to slow, it warned, blaming capacity constraints at its data centers. "I think what investors are missing is that for every year Microsoft overinvests - like they have this year - they're creating a whole percentage point of drag on margins for the next six years," said Gil Luria, head of technology research at D.A. Davidson. Meta, meanwhile, warned of "significant acceleration" in artificial intelligence-related infrastructure expenses next year. Bottlenecks impede growth Capacity constraints are rippling through the tech industry. Chipmakers including powerhouse Nvidia are struggling to keep up, in turn making it harder for cloud companies to build out capacity. Advanced Micro Devices, which reported results earlier this week, said demand for AI chips was rising much faster than supply, limiting its ability to tap the order surge. It warned that supply of AI chips would be tight going into next year. Despite the concerns, Meta and Microsoft said it was still very early in the AI cycle and emphasized the long-term potential of AI. The investments are reminiscent of when Big Tech was developing cloud businesses and waiting for customers to embrace the technology. "Building out the infrastructure is maybe not what investors want to hear in the near term, but I think the opportunities here are really big," said Meta CEO Mark Zuckerberg during Wednesday's earning call. "We're going to continue investing significantly in this."

Big Tech's AI splurge worries investors about returns ahead of Amazon results

Microsoft and Meta both said on Wednesday their capital expenses were growing due to their AI investments. Alphabet , too, reported on Tuesday that these expenditures would remain elevated.Big technology companies including Microsoft and Meta are stepping up spending to build out AI data centers in a rush to meet vast demand, but Wall Street is hungry for a quicker payday on the billions invested. Microsoft and Meta both said on Wednesday their capital expenses were growing due to their AI investments. Alphabet , too, reported on Tuesday that these expenditures would remain elevated. Amazon, which is set to report results after market hours on Thursday, is likely to echo these forecasts. The extensive capital spending could threaten fat margins at these companies, and pressure on profitability is likely to spook investors. Big Tech shares fell on Thursday, highlighting the challenges the companies face as they seek to balance ambitious AI pursuits with the need to reassure investors they are focused on short-term results. Shares of Meta slipped more than 3% and Microsoft fell 6%, despite each topping profit and revenue expectations for the July-September period. Amazon dipped 3%. "It's costly to run AI technology. Getting capacity is expensive," said GlobalData analyst Beatriz Valle. "It has become a competitive race among the big tech companies to build out capacity. It's going to take time to see the returns, to see widespread adoption of the technology." Microsoft's capital spending for a single quarter now is more than its annual expenditure used to be until fiscal 2020, according to Visible Alpha. For Meta, a quarter's worth of spending is in line with what they spent in a year until 2017. Microsoft said capital spending rose 5.3% to $20 billion in its first fiscal quarter, and predicted increased spending on AI in the second. But growth at its key cloud business Azure is likely to slow, it warned, blaming capacity constraints at its data centers. "I think what investors are missing is that for every year Microsoft overinvests - like they have this year - they're creating a whole percentage point of drag on margins for the next six years," said Gil Luria, head of technology research at D.A. Davidson. Meta, meanwhile, warned of "significant acceleration" in artificial intelligence-related infrastructure expenses next year. Bottlenecks impede growth Capacity constraints are rippling through the tech industry. Chipmakers including AI powerhouse Nvidia are struggling to keep up, in turn making it harder for cloud companies to build out capacity. Advanced Micro Devices, which reported results earlier this week, said demand for AI chips was rising much faster than supply, limiting its ability to tap the order surge. It warned that supply of AI chips would be tight going into next year. Despite the concerns, Meta and Microsoft said it was still very early in the AI cycle and emphasized the long-term potential of AI. The investments are reminiscent of when Big Tech was developing cloud businesses and waiting for customers to embrace the technology. "Building out the infrastructure is maybe not what investors want to hear in the near term, but I think the opportunities here are really big," said Meta CEO Mark Zuckerberg during Wednesday's earning call. "We're going to continue investing significantly in this."

Meta, Microsoft lift AI spending, worrying Wall Street ahead of Amazon results

Oct 31 (Reuters) - Big tech including Microsoft (MSFT.O), opens new tab and Meta (META.O), opens new tab are stepping up spending to build out AI data centers in a rush to meet vast demand, but Wall Street is hungry for a quicker payday on the billions invested. Microsoft and Meta both said on Wednesday their capital expenses were growing due to their AI investments. Alphabet (GOOGL.O), opens new tab, too, reported on Tuesday that these expenditures would remain elevated. Amazon (AMZN.O), opens new tab, which is set to report results on Thursday, is likely to echo these forecasts. The extensive capital spending could threaten fat margins at these companies, and pressure on this metric is likely to spook investors. Big tech shares fell in after-hours trading on Wednesday, highlighting the challenges the companies face as they seek to balance ambitious AI pursuits with the need to reassure investors they are focused on short-term results. Meta's stock fell 2.9% in after-hours trading, and Microsoft's stock price fell 3.6%, despite each topping profit and revenue expectations for the July-September period. Amazon stock also dipped. "It's costly to run AI technology. Getting capacity is expensive," said GlobalData analyst Beatriz Valle. "It has become a competitive race among the big tech companies to build out capacity. It's going to take time to see the returns, to see widespread adoption of the technology." Microsoft's capital spending for a single quarter now is more than its annual expenditure used to be until fiscal 2020, according to Visible Alpha. For Meta, a quarter's worth of spending is in line with what they spent in a year until 2017. Microsoft said capital spending rose 5.3% to $20 billion in its first fiscal quarter, and predicted increased spending on AI in the second. But growth at its key cloud business Azure is likely to slow, it warned, blaming capacity constraints at its data centers. "I think what investors are missing is that for every year Microsoft overinvests - like they have this year - they're creating a whole percentage point of drag on margins for the next six years," said Gil Luria, head of technology research at D.A. Davidson. Meta, meanwhile, warned of "significant acceleration" in artificial intelligence-related infrastructure expenses next year. BOTTLENECKS IMPEDE GROWTH Capacity constraints are rippling through the tech industry. Chipmakers including powerhouse Nvidia (NVDA.O), opens new tab are struggling to keep up, in turn making it harder for cloud companies to build out capacity. Advanced Micro Devices (AMD.O), opens new tab, which reported results earlier this week, said demand for AI chips was rising much faster than supply, limiting its ability to tap the order surge. It warned that supply of AI chips would be tight going into next year. Despite the concerns, Meta and Microsoft said it was still very early in the AI cycle and emphasized the long-term potential of AI. The investments are reminiscent of when Big Tech was developing cloud businesses and waiting for customers to embrace the technology. "Building out the infrastructure is maybe not what investors want to hear in the near term, but I think the opportunities here are really big," said Meta CEO Mark Zuckerberg during Wednesday's earning call. "We're going to continue investing significantly in this." Reporting by Anna Tong in San Francisco, and Aditya Soni and Deborah Sophia in Bengaluru; Editing by Sayantani Ghosh and Sonali Paul Our Standards: The Thomson Reuters Trust Principles., opens new tab Anna Tong Thomson Reuters Anna Tong is a correspondent for Reuters based in San Francisco, where she reports on the technology industry. She joined Reuters in 2023 after working at the San Francisco Standard as a data editor. Tong previously worked at technology startups as a product manager and at Google where she worked in user insights and helped run a call center. Tong graduated from Harvard University.

Tech giants are set to spend $200 billion this year chasing AI

Wall Street recently criticised major tech firms for their AI spending, but Amazon, Microsoft, Meta, and Alphabet plan to invest even more, exceeding $200 billion this year. These companies are securing chips and building data centers to support AI, aiming for future profitability despite current high expenses.Three months ago, Wall Street punished the world's largest technology firms for spending enormous amounts to develop artificial intelligence, only to deliver results that failed to justify the costs. Silicon Valley's response this quarter? Plans to invest even more. The capital expenditures of the four largest internet and software companies - Amazon, Microsoft, Meta and Alphabet - are set to total well over $200 billion this year, a record sum for the profligate collective. Executives from each company warned investors this week that their splurge will continue next year, or even ramp up. The spree underscores the extreme costs and resources consumed from the worldwide boom in AI ignited by the arrival of ChatGPT. Tech giants are racing to secure the scarce high-end chips and build the sprawling data centers the technology demands. To do so, the companies have cut deals with energy providers to power these facilities, even reviving a notorious nuclear plant. They're each trying to convince Wall Street that these huge investments will make their future businesses more profitable than the current ones selling digital ads, goods and software. On an investor call on Thursday, Andy Jassy, Amazon's chief executive, called AI a "really unusually large, maybe once-in-a-lifetime type of opportunity," evidenced by his company's projection for a record $75 billion in spending for 2024. "I think our customers, the business, and our shareholders will feel good about this long term - that we're aggressively pursuing it." Analysts at MoffettNathanson called Amazon's spending "truly staggering." A day earlier, Meta CEO Mark Zuckerberg pledged to ramp up investing in AI language models and other futuristic projects he now frames as core to his company's future. Meta's capital spending may climb as high as $40 billion this year. Meanwhile, Alphabet's capex budget came in higher than Wall Street expectations, and its CFO Anat Ashkenazi projected "substantial" increases in 2025.

Big Tech Is Facing Down a Major Problem With Its AI Plans

The AI industry is still struggling to reassure investors that the unfathomable billions of dollars it's pouring into the tech will be worth it in the end. As Reuters reports, Microsoft and Meta admitted this week that capital expenses would remain on the rise as they rush to meet AI demand by building out data center capacity. The shares of both fell on Wednesday, highlighting an inconvenient reality for AI-crazed tech outfits: that tech companies have yet to turn generative AI into a meaningful source of revenue despite spending billions, and it's making investors increasingly nervous. Major supply constraints caused by chipmakers struggling to meet big tech's insatiable appetite and massive running costs are compounding the issue. "It's costly to run AI technology," GlobalData analyst Beatriz Valle told Reuters. "Getting capacity is expensive." "It has become a competitive race among the big tech companies to build out capacity," she added. "It's going to take time to see the returns, to see widespread adoption of the technology." The money fire is likely to continue at least for the near future, with Meta forecasting "significant acceleration" in AI-related infrastructure expenses this week. The news had analysts concerned, with Meta's shares sliding almost three percent since the beginning of the week. "Meta needs to prove that it can continue to cover its AI costs as they rise next year, and any weakness in its core ad business could make investors nervous as they continue to wait for a return on Meta's bigger AI bets," Emarketer principal analyst Jasmine Enberg told Reuters. According to Meta CEO Mark Zuckerberg, however, that's all part of the long-term plan. "Building out the infrastructure is maybe not what investors want to hear in the near term, but I think the opportunities here are really big," a defensive Zuckerberg told investors during Wednesday's earnings call, as quoted by Reuters. "We're going to continue investing significantly in this." Meanwhile, the companies actually benefiting from the massive increase in spending are cloud computing providers like Amazon and chipmaker Nvidia, the latter of which has cemented itself as the industry-leading source of AI chips. Amazon surpassed estimates with its third-quarter earnings this week, causing shares to jump on Friday. But when generative AI will become a meaningful revenue driver for tech giants like Microsoft and Meta remains an open question. It doesn't help that they're all still struggling with core aspects of the tech, from persistent "hallucinations" to a wave of copyright infringement lawsuits.

Wall Street frets over Big Tech's $200bn AI spending splurge

Big Tech's capital spending is on track to surpass $200bn this year and rise even further in 2025, as anxiety grows on Wall Street about the returns on soaring investment in artificial intelligence. The four biggest US internet groups -- Microsoft, Meta, Amazon and Google's parent Alphabet -- this week offered investors brief glimpses into the benefits they are seeing from their headlong rush into generative AI, arguing that it was boosting the performance of core services and helping to hold down operating costs. But the stock market suffered a spasm on Thursday as investors looked past the imprecise benefits to focus instead on another big -- and very measurable -- jump in spending on chips and data centre infrastructure, as the AI race accelerates. Capital expenditure at the four biggest hyperscalers grew more than 62 per cent on the year before, to about $60bn during the quarter, according to this week's financial reports. Meta and Amazon were among those to point to further increases in spending next year. Analysts at Citi forecast that the quartet's total capital spending will hit $209bn this year, up 42 per cent on 2023. Citi estimates that data centres account for about 80 per cent of that total. "What is the real benefit?" said Jim Tierney, a growth stock investor at AllianceBernstein, voicing a common concern. "All of these companies are spending a huge amount of money," he added, with a resulting hit to profit margins that would become "more noticeable in 2025". One sign that demand for generative AI was starting to lift Big Tech's growth rates came from the accelerating growth in the cloud divisions at Microsoft and Google. But the optimism quickly dissipated when Microsoft went on to warn that cloud growth would slip back this quarter, largely because of supply constraints. Meanwhile, cloud market leader Amazon Web Services failed to hit the most optimistic hopes for an acceleration in its own growth, even as it lifted investors' spirits with unexpectedly strong profit margins. Companies that peppered their earnings calls this week with anecdotal and mostly vague assurances about AI returns included Alphabet, which said the new generative AI features in its search engine were increasing engagement and boosting usage. It also said that a quarter of the software it produced was now written by AI. Despite this, the growth in Google' search volumes declined from the preceding quarter, said Tierney, raising a question about how strong the AI effect had been. However, Microsoft said its revenue from AI was on the brink of hitting an annualised $10bn, reaching that milestone faster than any other business in its history. It also said that Copilot -- an AI feature for which it charges a monthly fee of $30 per user -- had experienced "the fastest growth of a new suite" yet seen in its 365 productivity software. The $10bn figure was a rare disclosure of a hard revenue number and serves as an early proof-point of the real benefits that could start to flow from generative AI, said Brent Thill, an analyst at Jefferies. But few other software companies have revealed anything about the effects of AI on their revenue, he added, leaving the stock market to fret. "It's murky. And investors are freaking out about the costs," Thill said. For its part, Meta told investors that AI had boosted returns from its advertising and improved engagement among users, while AWS said its "multibillion-dollar" AI business was growing at a rate of more than 100 per cent. If anecdotes like this were encouraging but fuzzy, the rapidly rising spending on new data centres and equipment for AI was all too clear. Facing a grilling from investors, executives at several companies claimed the massive increase in facilities to handle AI was closely tied to demand, and that capital efficiency would improve as the business increased in scale. Executives at Amazon and Microsoft drew comparisons with the early days of the cloud computing business, when building and equipping fleets of data centres also caused spending to soar. There are strong advanced buying signals from customers that make it possible to time investment spending closely to actual demand, said Amazon's chief executive Andy Jassy. Microsoft's chief financial officer Amy Hood said about half of the software company's capital spending goes on server purchases, which could be timed closely to increases in demand. Despite the claims of investment discipline, investors were left with the reality that the higher spending will hit Big Tech's income statements next year, even as any revenue benefits are uncertain. Meta, for instance, warned that 2025 would see "significant acceleration in infrastructure expense growth", as its new fleet of data centres lead to higher depreciation charges and operating costs. Changes in depreciation policies at Microsoft, Alphabet and Amazon in recent years will lessen the pain. All three have extended the useful lives of their data centre gear for accounting purposes, reducing the amount of depreciation they need to report each year. Amazon said extending the useful lives of its servers by a year had lifted the profit margin in its cloud division by 2 percentage points in the latest quarter -- the second time it has taken this step in two years. But even after the moves to push depreciation charges further into the future, the pressure on margins from soaring spending on AI will be hard to avoid. After a powerful two-year rally as earnings expectations for Big Tech have ratcheted steadily higher, this could indicate a turning point. The tech-heavy Nasdaq Composite closed 2.8 per cent lower on Thursday, with Microsoft, Meta and AI chipmaker Nvidia together shedding more than $400bn in value. "Investors are left asking if the 'beat and raise' era [in quarterly earnings announcements] is over," said Tierney. If so, the convulsion that passed through the market on Thursday could be a sign of rockier times ahead.

Big Tech Makes Money by Spending on AI Infrastructure | PYMNTS.com

Tech giants' investments in cloud infrastructure are reportedly paying off due to the demand for artificial intelligence. The momentum of cloud businesses began to slow in early 2022 as companies completed their migration to the cloud, but it has now picked up because companies need the infrastructure for AI, The Wall Street Journal reported Friday (Nov. 1). At the same time, they told investors that they must continue to spend on property and equipment to build more data centers, per the report. Google parent Alphabet, Amazon and Microsoft spent a combined $50.6 billion on this infrastructure in the last quarter, up from $30.5 billion a year ago, according to the report. While some question whether the demand for AI will continue growing enough to justify those investments, the companies' most recent quarterly results showed that the cloud business is going strong, the report said. All three companies are building AI products, but it's the infrastructure that is delivering profits in the near term, per the report. Other tech giants are also pouring resources into AI infrastructure, PYMNTS reported Thursday (Oct. 31). Meta plans to spend up to $40 billion on this infrastructure in 2024, and its AI efforts are already showing promising results in terms of user engagement and advertising effectiveness. Chip maker AMD reported record-breaking third-quarter revenue largely fueled by surging demand for AI-focused products, with the company's Data Center segment being the star performer. It was reported in September that OpenAI plans to bring together global investors to spend tens of billions of dollars on AI infrastructure in the United States. The planned projects include data centers, turbines and generators, and semiconductor manufacturing.

What Wall Street learned from the week's Big Tech earnings flurry

Reporting season from megacap technology stocks this week signaled to investors that hefty investments on networks and infrastructure needed to feed the growing boom in artificial intelligence may be starting to bear fruit in terms of profits. Earlier this year, concern that the payoff from enormous spending on AI will be pushed back dented investor sentiment and fueled a selloff in some of the biggest AI plays. Many this week appeared to prove to shareholders that the heightened spending is worth the wait. "The AI theme is intact if you're the mega caps," as companies show that they can monetize their investments while maintaining existing profitability, said Deepwater Asset Management's Gene Munster. "As long as that infrastructure continues to be built, then we continue to be in a good place for the broader AI trade." Among the megacap stocks, Alphabet , Amazon and Microsoft grew year-over-year, cloud-based revenue by 35%, 19% and 20%, respectively. But of the five largest companies that have so far reported results -- Meta Platforms , Alphabet, Amazon, Apple and Microsoft -- only two finished the week higher. META 5D mountain Meta, 5 days Commentary from some of the tech companies signaled that AI demand remains robust. Microsoft's finance chief said that demand is outpacing capacity, anticipating as much as 32% growth in the Azure cloud-based platform on a constant currency basis in the December quarter. Alphabet CEO Sundar Pichai said its "full stack" of AI products is operating at scale. Amazon CEO Andy Jassy justified stepped up AI spending, saying that investors will be rewarded over the long haul. GOOGL 5D mountain Alphabet, 5 days "People were betting against big tech making their numbers," said Ray Wang, principal analyst and founder at Constellation Research. "What they showed was that they still have the size and the scale to crank out earnings because their cost of sale is much lower and size and scale matters." Long-term, Wang expects a handful of technology names to come out on top given today's high AI costs relative to the open and decentralized Internet craze of the 1990s and the 2000s.That puts companies with deep pockets at an advantage. It also makes increased spending a necessity for today's incumbents to keep their market positions, said Mark Malek, chief investment officer at SiebertNXT. He believes many investors overlook the time and resources necessary to achieve this scale. Breaking down the megacaps, Constellation's Wang says pressure is building on Microsoft as to whether it's investing enough to refresh its infrastructure. He noted that Satya Nadella's Windows and Xbox giant today uses some of the oldest data centers. Near-term, Meta Platforms and Amazon appear to be approaching the end of their heightened spending cycles, which could translate to earlier payoffs, Wang said. Strong result and accompanying commentary from Amazon should also "push the naysayers" who are worried about rapid spending and a lagging retail business "out the door," said Eric Clark, portfolio manager of the Rational Dynamic Brands Fund. AMZN 5D mountain Amazon, 5 days Meanwhile, the still enormous spending patterns among megacap technology companies signals no downturn for de facto AI leader Nvidia. Since the launch of ChatGPT in late 2022, the stock has soared more than seven-fold, lifting the broader market and technology sector alongside. But that growth rate could ease once the initial AI buildout cycle slows, making way for the next wave of companies putting AI to use, such as potentially Oracle and Salesforce , Wang said. "There's a good runway of growth for the next two or three quarters in Nvidia," Clark said. "But when the rate of change is slowing, Nvidia's stock is not going to do very well. You're going to see the most crowded trade unwind - and usually it tends to be violent."

Wall Street to Big Tech: Show us the AI money

For tech's biggest players, this earnings season is starting to feel like a scene from the movie Jerry Maguire -- and the "show me the money" demands aren't working out any better than they did for Tom Cruise. Some analysts are even dubbing this the "show me the money" quarter, as Wall Street's patience with massive AI spending begins to wear thin. A tech stock selloff deepened Thursday as investors confronted the mounting costs of Silicon Valley's artificial intelligence ambitions. Microsoft (MSFT) stock plunged 6% and Facebook parent Meta (META) tumbled 4% after the companies reported earnings late Wednesday. And in after-hours trading Thursday following their own earnings releases, Amazon (AMZN) stock dropped more than 3% and Apple (AAPL) fell 2% -- despite all four companies reporting strong quarterly profits. Almost two years after ChatGPT kicked off Silicon Valley's AI gold rush, this week's tech earnings revealed both the promise and the staggering price tag of the AI revolution. While companies reported significant gains from AI initiatives -- Meta's ad prices up 11%, Google Cloud revenue surging 35% to $11.4 billion, Amazon's AWS growing 19% to $27.5 billion -- their warnings about future spending sparked a broad market retreat. Meta expects capital expenditures of up to $40 billion next year, Microsoft cautioned about ongoing OpenAI losses and slowing cloud growth, and even Apple, making its first careful steps into AI with its Apple Intelligence rollout this week, saw investors retreat -- despite record revenue of $94.9 billion. Tech executives' unwavering faith in AI's potential stands in stark contrast to investors' growing anxiety about the costs. "First, it's clear that there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years," Meta CEO Mark Zuckerberg told investors. Amazon chief Andy Jassy struck a similar note: "I think we've proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business. We expect the same thing will happen here with generative AI." Microsoft CEO Satya Nadella emphasized "AI-driven transformation." And earlier in the week, Google (GOOGL) chief Sundar Pichai highlighted "extraordinary momentum." But while tech leaders speak confidently about long-term returns, the market is increasingly focused on the short-term price tag of these ambitious visions. The mounting infrastructure costs, combined with uncertain timelines for returns, are testing investors' patience with Silicon Valley's spend-now-profit-later approach to innovation. Microsoft stock fell more than 6% on Thursday after executives predicted Azure's growth would slow and warned of weaker expansion in its AI-powered cloud business. The guidance suggested that even for Microsoft, which has emerged as an early AI leader through its partnership with ChatGPT maker OpenAI, the path to AI profits may be longer and costlier than investors hoped. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," said Nadella, whose company saw total revenue rise 16% to $65.6 billion. Microsoft's overall cloud revenue climbed 22% to $38.9 billion, but the company expects growth in its intelligent cloud segment to slow to 18-20% next quarter. At Google parent Alphabet, Pichai pointed to new AI features in Search and Cloud as key growth drivers helping push revenue up 15% to $88.3 billion. Google Cloud's profit jumped to $1.9 billion from $266 million a year earlier, suggesting the company is finding ways to monetize its AI investments. Meta leveraged AI to revitalize its core advertising business, with revenue jumping 19% to $40.6 billion. The company forecast fourth-quarter revenue between $45 billion and $48 billion, above analysts' expectations. But CFO Susan Li warned of a "significant acceleration in infrastructure expense growth next year" due to the "back-end weighted nature" of 2024 capital expenditures and expanding AI infrastructure. The massive spending plans highlight how AI's transformation of the tech industry remains in its early stages. While the technology is beginning to deliver measurable business results, tech giants are betting billions that the real payoff still lies ahead -- and asking investors for patience. Goldman Sachs (GS) has recently expressed concerns that while AI has the potential for significant efficiency gains in certain areas, the high costs associated with developing and maintaining AI systems could outweigh the benefits in many cases -- potentially making it more expensive than simply hiring human workers for certain tasks. With robust cash positions and strong core businesses, these companies appear able to sustain their AI investments even as costs mount. But the market reaction to Microsoft's and Meta's warnings serves as a reminder that even for tech's strongest players, the AI revolution is proving to be an increasingly expensive proposition with an uncertain timeline for returns. Like Jerry Maguire's demanding client in the 1996 film, Wall Street's message to Silicon Valley is getting clearer by the day. As a Bank of America (BAC) report puts it: "We expect AI to transition from a 'tell me' to a 'show me' story, with any disconnect between investments and revenue generation to come under increased scrutiny."

Nvidia and other AI stocks are getting dragged down by Microsoft and Meta

Despite posting robust quarterly profits, Microsoft (MSFT-5.55%) and Meta (META-4.07%) shares slumped Thursday as both tech giants signaled substantial future AI spending requirements and slower growth prospects. The companies, which have emerged as leaders in the AI sector, saw their stocks decline despite heavy investments in generative AI that had previously fueled investor optimism. The downward pressure rippled through the broader AI ecosystem, dragging down shares of key semiconductor and hardware providers. Nvidia (NVDA-4.22%) fell 4.5%, Advanced Micro Devices (AMD-2.29%) dropped 2.8%, Micron Technology (MU-3.80%) slid 4.4%, and Broadcom (AVGO-4.50%) was down 4.8%. Meanwhile, Super Micro Computer (SMCI-13.27%) faced an even steeper decline, plummeting 15% amid an ongoing dispute with its auditor. The AI hardware company is now at risk of potential delisting from the Nasdaq, adding further uncertainty for investors. In Microsoft's (MSFT-5.55%) third-quarter earnings report Wednesday evening, it acknowledged that it can't build data centers fast enough to meet the AI demand. Microsoft's "inability to build data centres fast enough has constrained its guidance for the coming quarter," Richard Windsor, founder of Radio Free Mobile, said in a note. During a post-earnings call with analysts, Microsoft CEO Satya Nadella said the company has run into external constraints due to high demand for artificial intelligence training and inferencing. "[Data centers] don't get built overnight," Nadella said. "Even in Q2 for example, some of the demand issues we have, or rather our ability to fulfill demand is because of, in fact, external third-party stuff that we leased moving up. That's the constraints we have." The tech giant's shares were down over 5% during trading on Thursday, trading at $409 per share. The stock is approaching its worst performance in months, having dropped nearly 2% over the past three months. Facebook parent Meta Platforms (META-4.07%) has invested billions of dollars into artificial intelligence as it looks to keep pace with its Magnificent 7 competitors. The tech giant warned that this spending will only grow into next year and beyond. Chief executive Mark Zuckerberg gave analysts a hint of what some of those investments could look like on a call Wednesday but said the company would offer more details once it finalizes its budget in the fourth quarter. "First, it's clear that there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years," Zuckerberg said. "So, I think we should invest more there." "And second, our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there too," he added. The shares of Meta were down 3.75% on Thursday afternoon.

1 Big Reason Google Surged While Microsoft and Meta Fell After Earnings | The Motley Fool

It all comes down to spending, and Google may have an advantage there. The "Magnificent Seven" all seem to be grouped together at times, but as the artificial intelligence (AI) races heat up, each of these marquee companies is fighting the others for AI supremacy. That's why investors are so tuned in to the details of each company's earnings results; specifically, whether each company's investments in AI are paying off. That requires looking at two things, obviously: the spending, and the payoff. While recent third-quarter results appear to show strong AI growth across leaders Alphabet (GOOG -0.02%) (GOOGL 0.10%), Microsoft (MSFT 0.99%), and Meta Platforms (META -0.07%), only Google parent Alphabet saw a post-earnings surge of about 3% on Wednesday after reporting Tuesday, while Microsoft and Meta were both down about 5% and 4%, respectively, by midday Thursday after their reports Wednesday night. The disparity appears to be for a very specific reason. First, the positives: Both Alphabet and Microsoft showed an acceleration in their cloud-related revenue, as you can see below. Data source: Company press releases. YOY = year over year. While Meta's AI-powered advertising-heavy revenue growth decelerated from 22% in the June quarter to 19% in September, its top and bottom lines still exceeded analyst expectations. So, big picture, all three companies showed strong growth in their most AI-oriented segments, with Microsoft's and Google's clouds accelerating, and Meta's core business exceeding expectations. While Microsoft and Google use AI across their businesses, it's a bit difficult to ascertain the specific AI impact within Google Search and YouTube, or Microsoft Office or Dynamics, even though AI "copilots" are increasingly being integrated into these platforms. So their clouds seem to be a good proxy for the current AI "returns." While all three companies reported strong growth, it was their reported and forecast capital spending numbers that likely explain the difference in their stock performance. Starting with Meta, it increased its outlook for capital spending to $38 billion to $40 billion for the year, up from a prior range of $37 billion to $40 billion. But CFO Susan Li's commentary regarding the 2025 spending outlook was quite aggressive. She said, "We expect a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet." Meta is already spending heavily on its AI infrastructure to power its core social media platforms, as well as its Llama generative AI models and even its Reality Labs segment. So for management to expect a "significant acceleration" was much more aggressive than investors wanted. Meanwhile, there was a stark contrast between Alphabet's and Microsoft's capital spending in the September quarter, too. Data source: Company press releases. YOY= year over year. QOQ = quarter over quarter. This is where things get interesting. Even though Alphabet's cloud growth accelerated more than Microsoft's, Alphabet's capital expenditures actually declined slightly from the prior quarter, though they were up a healthy 62.1% over the prior year. Still, the recent figures indicate Alphabet is currently moderating its spending. But Microsoft saw steady 7.6% growth over the prior quarter, indicating it continues to grow its outlays for AI infrastructure. On its conference call, Alphabet's new CFO, Anat Ashkenazi, indicated that the fourth-quarter spend would be about flat quarter to quarter. And while she also said spending would likely rise in 2025, she declined to say by how much. Meanwhile, Microsoft noted it would see another sequential increase in spending in the December quarter and much more in 2025. One thing that may explain the difference is that both Microsoft and Meta are somewhat late to the game in designing their own custom AI accelerators. On the other hand, Alphabet has been designing its custom tensor processing units (TPUs) since 2015. Producing more custom in-house chips is significantly cheaper than buying Nvidia GPUs, which is likely what Microsoft and Meta are mostly doing today. Thus, they are spending more on their respective infrastructures. In fact, the high prices for Nvidia chips is what recently led one analyst to downgrade Microsoft shares to neutral. That skepticism appears to have been borne out by earnings. But while Alphabet appears to have the upper hand today, Microsoft and Meta are now looking to make more of their own custom chips, too. So, investors should monitor each company's announcements regarding custom AI chips, and how their capital spending evolves. The good news? End AI demand seems strong for all three companies today.

AI boosts Meta and Microsoft Q3 earnings, but outlook sours stock prices

Shares in Meta Platforms Inc. and Microsoft Corp both fell in after-hours trading despite strong Q3 earnings on Oct. 30, as executives reduced their earnings outlook and forecasted more AI spending. Meta reported on Oct. 30 that its Q3 revenues were up 19% year-on-year to $40.59 billion and passed Wall Street estimates of $40.21 billion. Its earnings per share (EPS) came in at $6.03, beating estimates of $5.19. Microsoft's results said revenues were up 16% from last year to $65.59 billion, beating estimates of $64.41 billion alongside its EPS coming in at $3.30 -- above the $3.08 expectation. The pair's earnings come as they and America's other Big Tech players, Google, Apple and Amazon, all sunk big money into AI, launching new models or making new hardware to back the hot new tech. This year, Meta rolled out Meta AI across its popular WhatsApp, Facebook, and Instagram apps, leading founder and CEO Mark Zuckerberg to state that the firm "had a good quarter driven by AI progress." Meanwhile, Microsoft's earnings were boosted by a 33% year-on-year growth in its AI-powered Azure business, beating expectations it would grow around 29%. "Our AI business is on track to surpass an annual revenue run-rate of $10 billion next quarter, which will make it the fastest-growing business in our history to reach this milestone," Microsoft CEO Satya Nadella said on an earnings call. However, the shares of both companies have fallen in after-hours trading on Oct. 30 after seeing an initial jump. META fell 3.18% from its $591.80 close to $573, while MFST dropped 3.71% from its $432.53 close to $416.50, per Google Finance data. Traders were seemingly spooked by the outlook of both companies, who both signaled more big spending was to come on AI with little near-term results. On the earnings call, Zuckerberg noted its AI investments would "continue to require serious infrastructure" and expected Meta would continue "significant" investment, adding it hadn't "decided on a final budget yet." Related: Meta is reportedly building its own AI-powered search engine Financial chief Susan Li said it was focused on making Meta AI "as engaging and valuable a consumer experience as possible" and that "monetization opportunities will exist over time." Meta expected its full-year capital expenditures to land between $38 billion to $40 billion and expected "significant capital expenditures growth in 2025." Meta shares also dropped as it missed expectations for daily active users -- a core metric on the health of its business -- which notched a 5% year-over-year jump to 3.29 billion on average, lower than the anticipated 3.31 billion. Microsoft, meanwhile, said in its outlook for the current quarter that it expected its core AI offering, Azure, to grow between 31% and 32%, slightly down from the 33% posted last quarter. It added it expects revenue for this current quarter to land between $68.1 billion and $69.1 billion, below analyst expected revenues of $69.89 billion.

AI Splurge Looms Large

Listen on the go! A daily podcast of Wall Street Breakfast will be available by 8:00 a.m. on Seeking Alpha, iTunes, Spotify. Microsoft (MSFT) and Meta Platforms (META) sailed past analyst expectations with their quarterly earnings reports. But the Big Tech firms' guidance for more AI spending has investors worried over the results of these heavy investments in the short term. These concerns have dragged their shares nearly 4% before the bell on Thursday. AI demand vs. capacity: Microsoft easily eclipsed estimates with its Q1 results as its Azure cloud segment crushed expectations. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," said its CEO Satya Nadella. Shares initially rose after the results, but reversed course after Microsoft forecast slower Azure revenue growth and continued capacity constraints at data centers amid surging demand. It also plans to continue spending heavily on cloud and AI to scale related infrastructure. All about the money: Meta shares fell despite its Q3 earnings beat, which was tempered by traders' concerns that heavy technology spending would continue to pressure profits. "We had a good quarter driven by AI progress across our apps and business," said CEO Mark Zuckerberg. But Meta forecast a "significant acceleration" in spending on AI-related infrastructure in 2025. Zuckerberg acknowledged that this may not be what investors want to hear in the near term, but insisted that the opportunities here "are really big." SA commentary: "Microsoft is well positioned to capture market growth opportunity in cloud and AI, thanks to their substantial investments," said SA analyst Hunter Wolf Research, who continues to expect double-digit revenue and earning growth in the near future. Investing Group Leader Jonathan Weber believes Meta remains an attractive long-term investment, pointing to its rising revenue and cash flows, a fortress balance sheet, and a very reasonable valuation. Wednesday was a big day for Super Micro Computer (SMCI), which plunged over a third in response to its auditor resigning. It added to the worries of alleged financial reporting and governance issues that have cast shadows on the popular AI stock. Since an all-time high of $122.90 in mid-March, shares are down 73%, finishing yesterday's session at $33.07. Shares are also dropping again premarket, off another 5% to $31.44. What are investors saying on the matter? Check out the 400+ comment thread from SA subscribers. What are analysts saying on the matter? Read the latest article from SA Investing Group Leader Value Investor's Edge. What's next for the company? Auditor resignations are rare, but can happen for a range of reasons. In the case of Super Micro (SMCI), Ernst & Young was the second auditor the company had in a span of 18 months. In order to get things back in order, Super Micro will likely need to take action in these areas or otherwise risk suffering the fate of public firms that have found themselves in similar situations.

Big Tech: Microsoft, Meta beat forecasts, but Samsung stumbles

STORY: AI is in focus as the world's top tech names report earnings. Wednesday saw Microsoft and Meta both beat forecasts, but also give investors cause for concern. The Windows maker said earnings per share and revenue both came in better than expected. However, it forecast slower growth ahead for its cloud business, and said it would spend even more than analysts expected on rolling out AI. Microsoft now foresees capital expenditure of $80 billion over the year - up some $30 billion on last year. The heavy outlays have concerned investors, with one analyst telling Reuters the spending looked set to be a big drag on profit margins. There were caveats at Meta too. The Facebook parent also beat forecasts for profit and revenue. But it warned of a "significant acceleration" in costs related to AI. That left investors wondering whether digital ad sales - its main revenue earner - will be able to cover investment in the new tech. With no cloud business, Facebook also faces questions over when it will actually make money from AI. The mixed messages from the tech giants saw shares in both firms fall around 3% in after-hours trade. A day later in Asia, Samsung saw third quarter profits jump. But it warned the pace of recovery was weakening, as it struggles to cash in on the AI boom. Earlier this month, the South Korean firm issued a rare apology for its disappointing earnings, as it struggles to supply high-end chips to firms like Nvidia. Investors say it's been outpaced by local rival SK Hynix and Taiwan titan TSMC.

Meta Says It's 'Making a Lot of Progress' With AI as Spending Grows

Aaron McDade is a breaking news reporter for Investopedia. He is an experienced journalist who has covered everything from the latest in business and tech news to sports and international news like the war in Ukraine for respected outlets like Business Insider and Newsweek. Meta Platforms (META) CEO Mark Zuckerberg said in Wednesday's earnings call that more spending on artificial intelligence (AI) products and infrastructure "is maybe not what investors want to hear in the near term," but that he feels it's necessary for the tech giant to seize opportunities in the industry. The earnings call followed an estimate-topping third quarter from Meta, with net income coming in more than $2 billion higher than expected. Advertising revenue, the bulk of Meta's revenue, beat projections as the company has said its AI efforts have had a positive impact on the effectiveness of its ads. Meta also lifted the lower range of its projected capital expenditures to $38 billion to $40 billion, from $37 billion to $40 billion previously, as the tech giant and many of its peers ramp up investments in the development of AI products. AI Spending To Grow in 2025 While Zuckerberg and CFO Susan Li didn't offer numeric projections for Meta's expenditures in 2025, Li said they expect spending will grow next year, including a "significant acceleration in infrastructure expense growth" to support Meta's AI products. Zuckerberg said Meta is "making a lot of progress" with the products it has released so far, like the Meta AI chatbot and AI features for its Ray-Ban smart glasses. Zuckerberg also said he expects there will be further opportunities to use advances in the technology to "accelerate our core business" and provide a "strong" return on investment (ROI) in the coming years. Meta's New Llama 4 AI Model Set for Release Early Next Year Zuckerberg said Meta AI is still on track to be the most-used AI assistant on the market by the end of the year, noting it crossed the 500 million monthly active user (MAU) threshold in the quarter. Zuckerberg also said Llama 4, the newest generation of Meta's large language model (LLM), is "well into its development," with the smaller models of Llama 4 set for launch "sometime early next year." The upgraded model will have better reasoning ability, faster response times, and other new capabilities, the Meta CEO said. Meta shares slipped 3.3% in extended trading following the earnings call. They were up 67% for the year through Wednesday's close.

Tech Giants Are Set to Spend $200 Billion This Year Chasing AI

Three months ago, Wall Street punished the world's largest technology firms for spending enormous amounts to develop artificial intelligence, only to deliver results that failed to justify the costs. Silicon Valley's response this quarter? Plans to invest even more.

Meta to increase AI spend as revenue soars

The tech giant plans to spend big on AI because they see 'strong momentum' in this area. Meta's third-quarter revenue was up 19pc to $40.59bn, the highest in recent years, which CEO Mark Zuckerberg attributed to the company's AI progress across its apps and business. In the latest earnings call yesterday (30 October), the tech giant revealed a significant net income increase of 35pc to $15.68bn, raising the diluted earnings per share to $6.03. CFO Susan Li expects Meta's fourth quarter revenue to be up by a further $5bn taking it to the $45-48bn range. Zuckerberg said that parts of the company's "long-term vision around AI and the future of computer" were coming into "sharper focus" and added that Meta AI now has 500m monthly active users. Improvements to Meta's AI-driven feed and video recommendations have led to an 8pc increase in time spent on Facebook and a 6pc increase on Instagram this year, he said, and more than 1m advertisers used Meta's generative AI tools to create more than 15m ads just in the last month. Meta's large language models are advancing fast, with Llama 4, its newest LLM model being "well into its development", according to Zuckerberg. He expects the smaller Llama 4 models will be released first early next year, which he said will be "a big deal", pointing to new capabilities and speed. 'AI presents opportunities' Significantly, Zuckerberg said that AI advances will accelerate the company's core business and therefore more investment in AI is warranted. "Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there," he said. The company didn't give an exact budget for AI future spend on the call but Li said she expects to see significant "scaling up" of its infrastructure capacity. Meta shares were down 4pc despite topping profit and revenue expectations, with Reuters reporting that investors were likely spooked by large AI spending plans. And the increased focus on AI comes with regulatory challenges also. Meta released compact versions of its Llama 3.2 AI models last week, which it said, used significantly less space than the original 3.2 versions released last month. However, the larger multimodal models of Llama 3.2, 11B and 90B, which can process multiple formats, such as text, images, audio and video, are not available in the EU. In the summer, Meta said that it will not release these models in the EU because of the bloc's "unpredictable" regulatory environment. The month before this announcement, the company rolled back on plans to train its large language models using public content shared by adults on Facebook and Instagram, following intensive discussion with the Irish Data Protection Commission. Don't miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic's digest of need-to-know sci-tech news.

Meta's Ad Business Is Booming, But Its A.I. Bets Have Yet to Pay Off

Meta (META) may have surprised analysts yesterday (Oct. 30) with stronger quarterly results than expected. But despite bringing in record revenue bolstered by its core ad business, the tech giant's ambitious plans to significantly ramp up its spending on A.I. bets -- many of which have yet to directly pay off -- also stoked investor fears. The company's shares fell by more than 1 percent today (Oct. 31). Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters The social media giant reported record revenue of $40.5 billion for the July-September quarter, representing a 19 percent year-over-year increase. Net income rose 35 percent to $15.6 billion for the quarter. Both figures beat analyst estimates. The company expects this momentum to continue into the current quarter, predicting revenue to reach somewhere between $45 billion and $48 billion, said CFO Susan Li. Almost all of Meta's revenue came from ad sales on Facebook, Instagram, Threads and WhatsApp, which totaled $39.8 billion for the quarter. Sales from its Reality Labs division -- which encompasses the company's virtual reality headsets and Ray-Ban smart glasses -- came in lower than Wall Street's expectations at $270 million, although representing a 28 percent increase year-over-year. Reality Labs reported an operating loss of $4.4 billion, which was narrower than analysts had predicted. Like its Big Tech rivals, Meta is attempting to stake out a role of dominance in the A.I. revolution. The company earlier this year released Meta A.I., a generative A.I. assistant integrated across its products and apps that has already racked up 500 million users. And in September, it unveiled Llama 3.2 as its first open-source multimodal A.I. model. "This might be the most dynamic moment I've seen in our industry," CEO Mark Zuckerberg said on an earnings call yesterday. "If we do well, then the potential for Meta and everyone building with us will be massive." As Meta's A.I. ambition grows, so is its spending -- the company reported capital expenditures of $9.2 billion between July and September, up from the $8.47 billion spent in the three-month period prior. The majority of this spending went towards data centers and related infrastructure, which have become an increasingly pertinent area of focus for tech companies looking for more compute power to power their A.I. models. "The opportunities around here are really big; we're going to continue investing significantly in this," said Zuckerberg. Meta's full-year capital expenditure is expected to reach $38 billion to $40 billion, higher than previous estimates. Aside from developing foundational models and investing in A.I. infrastructure, Meta is also looking to integrate A.I. into its various content platforms. "We're going to add a whole new category of content, which is A.I.-generated or A.I.-summarized content, or existing content pulled together by A.I. in some way. We're starting to test different things," Zuckerberg said on the earnings call.

Meta's big AI spending will only get bigger

Bitcoin's rise is predicting a Donald Trump election victory, strategist says In its third-quarter earnings report Wednesday, Meta raised capital expenditure estimates for the 2024 fiscal year to between $38 billion and $40 billion, from $37 billion to $40 billion previously. The company said it expects "significant capital expenditures growth in 2025" and "significant acceleration in infrastructure expense growth next year." Chief executive Mark Zuckerberg gave analysts a hint of what some of those investments could look like on a call Wednesday, but said the company would offer more details once it finalizes its budget in the fourth quarter. "First, it's clear that there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years," Zuckerberg said. "So, I think we should invest more there." "And second, our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there too," he added. Meta stock was down about 1.8% shortly after the market opened Thursday. Read more: 3 years after turning Facebook into Meta, Mark Zuckerberg's real win is AI Strategists at Jefferies (JEF0.00%) are estimating next year's expenses to total $110 billion -- up 14% from an estimated $97 billion this year, according to a Thursday note. They also project capital expenditures of $52 billion, an annual increase of 33%. "Investors have a tolerance for AI spend as long as they can understand the vision, the impacts and see active progress," said Christophe Ponsart, partner in the applied AI practice at consulting firm Qvest.US. "Meta is keeping the public actively aware of ongoing progress with these investments and releasing models iteratively and often -- that's a good thing for investors." The Menlo Park, California-based company took efforts Wednesday to demonstrate how its existing investments in AI are showing signs of payoff. Meta shared that more than one million advertisers used generative AI tools to create more than 15 million ads last month. Meta AI, the company's AI chatbot embedded into its popular social media platforms like Instagram and Facebook, has more than 500 million monthly users. Zuckerberg had previously said it was on track to become the most used AI assistant in the world by the end of this year. And AI-driven feed and video recommendations have driven an 8% increase in time spent on Facebook and a 6% increase on Instagram this year. Wedbush analysts led by Scott Devitt said they believe "increased investment is justified given the benefits AI is already bringing to the business and the considerable optionality for future growth" across its applications and at Reality Labs, the unit responsible for Meta's virtual and augmented reality projects. For the three months ended Sept. 30, Reality Labs suffered an operating loss of $4.43 billion. Meta said it expects operating losses to "increase meaningfully year-over-year." Bank of America (BAC0.00%) researchers said in a note Thursday that "Meta's growing AI focus could drive positive product surprises in coming quarters," including AI customer service offerings, and Meta AI ads or subscriptions, which could give investors added optimism. Overall, Wedbush said Meta's third-quarter results were "healthy" and showed the increasing momentum of AI. Meta reported $15.69 billion in net income for the quarter, or $6.03 per share, up from $11.58 billion in the same quarter last year -- beating Wall Street estimates. Revenue came in at $40.59 billion, up 19% from $34.15 billion a year ago and surpassing Wall Street's estimated $40.19 billion for the quarter. Meta has had a strong year, with the stock up about 68% so far in 2024.

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. Like its Big Tech peers, Meta is rushing into artificial intelligence as it tries to build revenue streams away from its social media core business. San Francisco, Oct 31, 2024 -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. But investors sent Meta shares lower in after hours trading over the outlook for AI spending in the months ahead and another big loss at its virtual and augmented reality arm, Reality Labs. "Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too," Meta's founder and chief executive Mark Zuckerberg told analysts. "We haven't decided on a final budget yet, but those are some of the directional trends," he added. Meta's share price slipped nearly three percent after its earnings results were published. Like its Big Tech peers, Meta is rushing into artificial intelligence as it tries to build revenue streams away from its social media core business. In recent months Zuckerberg has put most of his attention and spending on the company's AI innovations that have been rolled out as chatbots across its platforms or used to upgrade its ad tech. On Wednesday, Meta once again raised its capital investment outlook: for 2024 alone, it is forecasting a range of $38-40 billion, compared with $37-40 billion previously, much of it for AI. Investors "were a little disappointed by the rising costs" said Jasmine Enberg of Emarketer. "It's going to take longer time to pay off" than some had hoped, she added. In the first quarter this year, the spending had already caused concern among investors, despite a doubling of earnings. But a quarter later, Meta's results impressed investors with a further surge in profits, showing that its core ad business could support the investments. "Meta's solid revenue growth in the quarter will help stave off investor concern about its AI investments," said Debra Aho Williamson of Sonata Insights, who added that these investments were making it easier to post ads on the platforms. However, she warned, that the full impact of consumer facing AI "won't be felt until 2025 or beyond." Reactions were positive last month when the company unveiled its Orion augmented reality glasses, which remain experimental but bolstered confidence that Meta will be a leader in the AI wearable space. Meta also hopes to ride on the excitement of its Ray-Ban Meta smart glasses, which it developed with EssilorLuxottica, the European eyewear giant. Analysts believe that the glasses could be a hot item during the end-of-year holiday season. But the recurring losses at Reality Labs, the VR division, continued to weigh on investors minds. The division posted $270 million in revenues in the third quarter -- and $4.4 billion in operating losses.

Meta Warns of Worsening AI Losses After Sales Narrowly Beat

Meta's core advertising business is expected to fund the effort Meta Platforms Inc. CEO Mark Zuckerberg will ramp up heavy investments in AI and other futuristic technologies, continuing a years-long tug-of-war between the company's long-term bets and the core advertising business that provides the vast majority of Meta's revenue. Zuckerberg warned investors Wednesday that Meta will continue to spend significantly on infrastructure and other projects like the metaverse and AI-powered glasses, efforts he believes are core to the company's future. That will be supported by the ads business, which isn't generating the kind of momentum Wall Street expected. Shares fell more than 2.8% in extended trading. "We're seeing AI have a positive impact on nearly all aspects of our work, from our core businesses to new services and computing platforms," the Meta chief executive officer said during its third quarter earnings call. "There are lots of opportunities to use new AI advances to accelerate our core business." Meta cautioned that losses from Reality Labs, its division focused on artificial intelligence and augmented reality, will continue to widen "meaningfully" this year, adding that the 2025 budget is still being finalized. Reality Labs reported a $4.4 billion operating loss in the quarter. With costs projected to reach nearly $100 billion this year, Meta is putting pressure on its core advertising business to fund the effort. Meta told investors Wednesday that revenue for the current quarter would be between $45 billion and $48 billion. Analysts were expecting fourth-quarter revenue of $46 billion. Zuckerberg has worked to re-frame the social media company as an AI innovator in recent years, changing investor perception of Meta's potential growth. Meta has developed several key AI products as part of that pivot, including large language models used to power chatbots, an assistant built into its various social apps, and AI-powered smart glasses. Meta is already working on the next version of Llama, the large language model that powers its AI products and services, and Zuckerberg said Llama 4 will be faster, more powerful and more cost-effective than previous models. Some of Zuckerberg's most ambitious projects, though, are still years away from mainstream consumption. Eventually Zuckerberg hopes that users will work and play inside of a digital universe known as the metaverse, which Meta is still building out. The company also recently unveiled its first pair of augmented reality glasses, which can project images onto the physical world. Zuckerberg hopes that those glasses, called Orion, may one day rival the smartphone. That focus on AI has helped fuel Meta's stock price, which was up more than 67% this year at market close Wednesday, making it one of the best performing stocks in the S&P 500. But it has also come with a steep cost. "Our AI investments continue to require serious infrastructure and I expect to continue investing significantly there," Zuckerberg said. Meanwhile, Meta's social networks, including Facebook and Instagram, continue to drive the bulk of the business. Meta reported sales of $40.6 billion for the period ended Sept. 30, a jump of 19% over the prior-year quarter, and just above the $40.3 billion average estimate from Wall Street analysts. Meta has leaned on AI advancements to improve its ad targeting and content recommendations, which have had a more immediate impact on business results. The company has pivoted its algorithms to show people more content from outside their network of friends and family, part of a broader strategy to increase engagement and keep people scrolling. It's also been reducing the spread of political content. AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram, Zuckerberg said Wednesday. Those recommendations are largely powered by AI advancements, which help the company more accurately predict what people want to see. Meta said its expenses for the year will be $96 billion to $98 billion, lowering the top end of that range by $1 billion.

Meta sees AI spending accelerating as earnings top forecasts

Meta cited "strong momentum" in its numerous bets on artificial intelligence as quarterly revenue and earnings topped Wall Street expectations, and said that spending on the technology will continue to accelerate into 2025. Revenues in the third quarter increased 19 per cent to $40.6bn, at the top end of its guide range and a whisker above Wall Street estimates of $40.3bn. Net income jumped 35 per cent to $15.7bn, well above consensus of a rise to $13.6bn. Meta shares, which are up more than 70 per cent in 2024, were down about 3 per cent after the results were released. "We had a good quarter driven by AI progress across our apps and business," chief executive Mark Zuckerberg said, pointing to "strong momentum" in Meta AI, the company's chatbot and the adoption of its open large language model Llama by businesses and developers. He also pointed to recent excitement around its AI-powered glasses, part of a partnership with Ray-Ban eyewear. The company said it anticipated fourth-quarter sales in the range of $45bn-$48bn. The consensus estimate was $46.2bn, according to S&P Capital IQ. Meta also raised the bottom of its range for full-year 2024 capital expenditure guidance from $37bn-$40bn to $38bn-$40bn. It added that it expected a "significant acceleration in infrastructure expense growth" next year due to the "higher growth in depreciation and operating expenses of our expanded infrastructure fleet".

Meta's profit rises 35%, even as spending spree continues

The Silicon Valley company reported double-digit revenue and profit growth for the third quarter, driven largely by advancements in its systems for advertisement targeting and suggesting relevant posts and videos to users. The improvements came from its continued investments in artificial intelligence, the company said.For the last few years, Meta has faced criticism from investors for spending on future-facing projects like artificial intelligence, chatbots and the metaverse. Now Meta wants everyone to know that at least some of those investments are starting to pay off. On Wednesday, the Silicon Valley company reported double-digit revenue and profit growth for the third quarter, driven largely by advancements in its systems for advertisement targeting and suggesting relevant posts and videos to users. The improvements came from its continued investments in artificial intelligence, the company said. Revenue was $40.6 billion, up 19% from a year earlier and above Wall Street estimates of $40.2 billion, according to data compiled by FactSet, a market analysis firm. Profit was $15.7 billion, up 35% from $11.6 billion a year earlier. But Meta also said it would continue a huge spending spree that has spooked Wall Street. The company said it spent $23.2 billion on costs and expenses and $9.2 billion in capital expenditures in the third quarter, including on computing infrastructure for AI, building the immersive world of the metaverse and other expenses. It also raised its annual spending forecast to $38 billion to $40 billion, up from the $37 billion to $40 billion it had projected in July. The company said it anticipates a "significant acceleration in infrastructure expense growth" in 2025, as it continues to invest in building new data centers and other AI-related costs. Shares of Meta fell more than 2% in after-hours trading, after closing at $591.80. The third-quarter figures underscored how Meta's digital advertising business continues to buttress its extravagant spending. Executives have said its huge investments in AI and the metaverse will improve all of its services. The company has raised its spending forecast several times this year. "Meta is firing on all cylinders and AI is clearly driving growth," said Jesse Cohen, a senior analyst at Investing.com. "With that being said, investors appear to be disappointed about the company's forward guidance and the rising costs needed to develop AI features." Meta has shown some fruits of its investments in recent weeks. It introduced a new virtual reality headset and a set of augmented reality glasses with holograph technology built into the lenses. It also added enhancements to its AI assistant and unveiled a set of AI tools for automatically generating videos, instantly editing them and synchronizing them with AI-generated sound effects, ambient noise and background music. Some of the investments have yielded unexpected hits. Sales of Meta's Ray-Ban smart glasses, which allow people to take photos, video and listen to music through the frames, have exceeded expectations and have been in demand at Ray-Ban retail stores across Europe, the company has said. Other tech giants have also spent billions on AI. On Tuesday, Alphabet, the parent company of Google, said it spent $13 billion on capital expenditures in the third quarter -- including large investments in data centers and chips to power AI -- which was up 62% from a year earlier. "We had a good quarter, driven by AI progress across our apps in business," Meta CEO Mark Zuckerberg said in a statement. The company said more than 3.29 billion people use one or more of Meta's apps, which include Facebook, Instagram and WhatsApp, every day.

Tech Down as AI Enthusiasm Wanes -- Tech Roundup

Shares of technology companies fell sharply as the sheen continued to come off artificial-intelligence stocks. Shares of Microsoft slid about 6% after the software giant's sales projection for the current quarter lagged Wall Street expectations, dashing hopes that AI investments would result in a bonanza. Nonetheless, one brokerage said the long-term outlook for Microsoft's AI business was healthy. "Microsoft is by far the best-positioned name in software to build a large and durable enterprise software business around the new capabilities enabled by Generative AI," said analysts at brokerage Morgan Stanley, in a note to clients. Meta Platforms fell 4.1% amid concerns about the Facebook parent's AI investments. Server maker Super Micro Computer, one of the early AI winners, continued a rout related to its former auditor, Ernst & Young's warnings about the reliability of its accounts. Shares of Uber Technologies fell 9.3% after the ride-hailing company reported quarterly bookings shy of expectations. Amazon shares rallied in after-hours trading as the online retail giant reported third-quarter earnings that beat Wall Street estimates.

Apple, Microsoft Need To Do More Than Just Beating Wall Street Estimates, Says Analyst: 'AI Enthusiasm And Potential Is Not Enough" - Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL)

Major technology firms are encountering a surprising trend where surpassing Wall Street estimates is not enough to satisfy investors. This has led to a decline in stock prices, despite positive earnings reports. What Happened: Major technology companies are experiencing a paradox where surpassing Wall Street estimates is insufficient to satisfy investors. On Thursday, Microsoft MSFT reported quarterly revenue exceeding expectations by $1 billion and an 11% increase in net income compared to the previous year. Despite these impressive figures, Microsoft's shares fell by 6.1% due to a conservative forecast for the upcoming quarter, marking its worst performance since October 26, 2022, CNBC reported on Friday. Apple AAPL faced similar investor reactions. Despite exceeding Wall Street estimates, the stock began sliding down during Friday pre-market due to investors concerns about weak guidance for December quarter sales. Even Alphabet GOOGL, which initially saw a nearly 3% rise in shares following its earnings report on Wednesday, experienced a 1.9% decline on Thursday after OpenAI announced rolling out of Chat GPT Search, a competition for Google Search. See Also: Cathie Wood's Sky-High Vision: Dumps Shares Of Cybercab Touting Tesla For This eVTOL Play Ross Mayfield, an investment strategist at Baird Private Wealth Management, commented on the situation, stating, "I think we're getting to the point where AI enthusiasm and potential is not enough. These companies are not quite delivering the growth that is priced into them." Why It Matters: The comment comes at a time when companies like Microsoft, Apple and Meta are banking on the AI buzz. Microsoft's AI Business is on track to surpass $10 billion in annual revenue, marking a significant milestone. CEO Satya Nadella emphasized the rapid adoption of AI across Microsoft's product portfolio, highlighting strong customer demand. Jim Cramer noted that Alphabet's plans to increase AI infrastructure investments next year could significantly benefit NVIDIA Corp NVDA. Alphabet's recent earnings report revealed a 15% revenue increase, underscoring its strategic focus on technology advancements. Read Next: Cathie Wood Shuffles Her Tech Deck: Continues Dumping Tesla And Palantir, Stocks Up On AMD And Meta Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Images via Shutterstock, Edited via Canva Market News and Data brought to you by Benzinga APIs

Even Mark Zuckerberg seems surprised by Meta's pace of spending on AI

Meta has been so quick to build out its massive data center and computing infrastructure for artificial intelligence projects that CEO Mark Zuckerberg is even a bit surprised. In a call with analysts on Wednesday after Meta's third-quarter earnings report, Zuckerberg explained to investors how Meta's rising costs for the year are tied to the speed at which employees are able to get data centers, servers and chips for AI up and running. "Going into the year, we had a range for what we thought we could potentially do, and we've been able to do more than we've kind of hoped and expected at the beginning of the year," Zuckerberg said. It also means investors have to buckle up for higher expenses. Meta raised the low end of its capital expenditures guidance for 2024 to $38 billion from $37 billion. The top end is still $40 billion. "It's actually something that I'm quite happy that the team is executing well on," Zuckerberg said. "That execution makes me somewhat more optimistic that we're going to be able to keep on building this out at a good pace." Meta added that the expenditures, which include purchases of billions of dollars worth of Nvidia's graphics processing units, will grow significantly in 2025. Meta shares dipped in extended trading on Wednesday despite the company beating on earnings and revenue. Weaker-than-expected user growth was part of the concern, along with rising costs.

Meta's Zuckerberg Touts AI Progress but Warns of 'Serious Infrastructure' | PYMNTS.com

The old saying is you've got to spend money to make money. As for the core businesses: Earnings supplementals noted that total advertising-related revenues came in at $39.9 billion, compared to $33.6 billion last year. Ad impressions delivered 7% growth year over year, where those growth rates had been as high as 21% a year ago, worldwide. The average price per ad was 11%, up slightly from the 10% in the second quarter. The firm reported a daily active user count of about 3.29 billion, up 5%. CEO Mark Zuckerberg said on the conference call with analysts that pushing ahead with AI will be tied to "serious infrastructure." That infrastructure will demand that the company "continue investing significantly" against a backdrop where the executive also said that the firm had not decided on a "final budget" yet. 2025 looms as a year where Zuckerberg and CFO Susan Li said on the call that 2024 capex will be around $38 billion to $40 billion, tightening the bottom end of the range. The forward guidance of $45 billion to $48 billion for the fourth quarter sales implies roughly 12% to 19% growth from the year ago period. It must be noted that Meta's stock has surged by double digits through the past year, and AI has been a focus on earnings calls and presentations. That narrative continued on Wednesday night: Zuckerberg said that "parts of our long-term vision around AI and the future of computing [are] coming into sharper focus. We estimate that there are now more than 3.2 billion people using at least one of our apps each day, and we're seeing rapid adoption of Meta AI and Llama, which is quickly becoming a standard across the industry." He noted that Threads has evolved into a community with 275 million monthly active users -- growing by more than 1 million signups daily. "We are making a lot of progress with our AI efforts too, and we're seeing AI have a positive impact on nearly all aspects of our work -- from our core business engagement and monetization to our long-term roadmaps for new services and computing platforms," Zuckerberg said. Meta AI has more than 500 million monthly active users, he said. Improvements to AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone, said Zuckerberg, who added "more than a million advertisers used our GenAI tools to create more than 15 millions ads in the last month. And we estimate that businesses using image generation are seeing a 7% increase in conversions. ... We believe that there's a lot more upside here. "Llama token usage has grown exponentially," he said. The Llama 3 models, he said, represent an "inflection point" in the industry, but Llama 4 is "well into development." The company continues to lose money on its Reality Labs segment -- home to virtual reality and augmented reality efforts -- where revenues of $270 million were higher than $210 million a year ago, but the operating loss increased to $4.4 billion, up from $3.7 billion last year. Zuckerberg said on the call that its Ray-Ban glasses have been doing well, and now have a Meta AI integration that helps users with suggestions as they are using the product -- which he termed as "the ideal form factor for AI because you can let your AI see what you see, hear what you hear, and talk to you. Demand for the glasses continues to be very strong." CFO Li said that within ad revenues, "The online commerce vertical was the largest contributor to year-over-year growth, followed by health care and entertainment and media. ... On Instagram, Reels continues to see good traction. And we're making ongoing progress with our focus on promoting original content, with more than 60% of recommendations now coming from original posts in the U.S." Li pointed to the use of advanced models to monetize and enhance marketing performance. "Similar to organic content ranking, we are finding opportunities to achieve meaningful ads performance gains by adopting new approaches to modeling. For example, we recently deployed new learning and modeling techniques that enable our ad systems to consider the sequence of actions a person takes before and after seeing an ad. Previously, our ad system could only aggregate those actions together, without mapping the sequence." The company has seen as much as a 2% to 4% increase in conversions based on testing within selected segments, Li said. "For Reality Labs, we continue to expect 2024 operating losses to increase meaningfully year over year due to our ongoing product development efforts and investments to further scale our ecosystem," she said.

Meta shows strong growth as AI spending surges

San Francisco (AFP) - 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. But investors sent Meta shares lower in after hours trading over the outlook for AI spending in the months ahead and another big loss at its virtual and augmented reality arm, Reality Labs. "Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too," Meta's founder and chief executive Mark Zuckerberg told analysts. "We haven't decided on a final budget yet, but those are some of the directional trends," he added. Meta's share price slipped nearly three percent after its earnings results were published. Like its Big Tech peers, Meta is rushing into artificial intelligence as it tries to build revenue streams away from its social media core business. In recent months Zuckerberg has put most of his attention and spending on the company's AI innovations that have been rolled out as chatbots across its platforms or used to upgrade its ad tech. On Wednesday, Meta once again raised its capital investment outlook: for 2024 alone, it is forecasting a range of $38-40 billion, compared with $37-40 billion previously, much of it for AI. 'Rising costs' Investors "were a little disappointed by the rising costs" said Jasmine Enberg of Emarketer. "It's going to take longer time to pay off" than some had hoped, she added. In the first quarter this year, the spending had already caused concern among investors, despite a doubling of earnings. But a quarter later, Meta's results impressed investors with a further surge in profits, showing that its core ad business could support the investments. "Meta's solid revenue growth in the quarter will help stave off investor concern about its AI investments," said Debra Aho Williamson of Sonata Insights, who added that these investments were making it easier to post ads on the platforms. However, she warned, that the full impact of consumer facing AI "won't be felt until 2025 or beyond." Reactions were positive last month when the company unveiled its Orion augmented reality glasses, which remain experimental but bolstered confidence that Meta will be a leader in the AI wearable space. Meta also hopes to ride on the excitement of its Ray-Ban Meta smart glasses, which it developed with EssilorLuxottica, the European eyewear giant. Analysts believe that the glasses could be a hot item during the end-of-year holiday season. But the recurring losses at Reality Labs, the VR division, continued to weigh on investors minds. The division posted $270 million in revenues in the third quarter -- and $4.4 billion in operating losses.

Meta warns of 'significant acceleration' in costs tied to AI after...

Facebook owner Meta Platforms beat analysts' estimates for third-quarter revenue and profit on Wednesday, but warned of "significant acceleration" in infrastructure expenses related to its artificial-intelligence buildout, sending mixed signals about whether higher digital ad sales from its core social media business would continue to cover its massive AI investments. Shares of the Menlo Park, Calif.-based firm fell 2.5% in after-hours trading. The world's biggest social media company, headed by CEO Mark Zuckerberg, reported third-quarter profit of $6.03 per share, compared with estimates of $5.25 per share, according to data compiled by LSEG. Third-quarter revenue rose to 19% to $40.59 billion, compared with analysts' estimates of $40.29 billion. The company also forecast between $45 billion and $48 billion in fourth-quarter revenue, compared with analysts' estimates of $46.31 billion, according to data from LSEG. Advertising accounts for the vast majority of Meta's revenue, meaning higher marketing spending during the holiday season could provide a crucial boost to the company's bottom line, according to analysts. Meta's earnings come after encouraging results from digital ad bellwethers Alphabet and Snap, which both beat third-quarter revenue estimates on Tuesday thanks in part to rising sales of AI-assisted ads. Like its Big Tech peers, it has invested heavily in data centers to capitalize on the generative AI boom. Unlike providers of cloud services, however, it does not expect to earn money from those investments right away and therefore is more subject to scrutiny from investors around its spending. The company kept costs in check in the third quarter, with total costs of $23.2 billion and capital expenditure of $9.2 billion. It projected a slightly improved expense picture for the year as well, narrowing its total expense forecast to $96 to $98 billion. In its press release, however, it warned of "a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet."

Meta's Profit Rises 35 Percent, Even as Spending Spree Continues

For the last few years, Meta has faced criticism from investors for spending on future-facing projects like artificial intelligence, chatbots and the metaverse. Now Meta wants everyone to know that at least some of those investments are starting to pay off. On Wednesday, the Silicon Valley company reported double-digit revenue and profit growth for the third quarter, driven largely by advancements in its systems for advertisement targeting and suggesting relevant posts and videos to users. The improvements came from its continued investments in artificial intelligence, the company said. Revenue was $40.6 billion, up 19 percent from a year earlier and above Wall Street estimates of $40.2 billion, according to data compiled by FactSet, a market analysis firm. Profit was $15.7 billion, up 35 percent from $11.6 billion a year earlier. But Meta also said it would continue a huge spending spree that has spooked Wall Street. The company said it spent $23.2 billion on costs and expenses and $9.2 billion in capital expenditures in the third quarter, including on computing infrastructure for A.I., building the immersive world of the metaverse and other expenses. It also raised its annual spending forecast to $38 billion to $40 billion, up from the $37 billion to $40 billion it had projected in July. The company said it anticipates a "significant acceleration in infrastructure expense growth" in 2025, as it continues to invest in building new data centers and other A.I.-related costs. Shares of Meta fell more than 2 percent in after-hours trading, after closing at $591.80. The third quarter figures underscored how Meta's digital advertising business continues to buttress its extravagant spending. Executives have said its huge investments in A.I. and the metaverse will improve all of its services. The company has raised its spending forecast several times this year. "Meta is firing on all cylinders and A.I. is clearly driving growth," said Jesse Cohen, a senior analyst at Investing.com. "With that being said, investors appear to be disappointed about the company's forward guidance and the rising costs needed to develop A.I. features." Meta has shown some fruits of its investments in recent weeks. It introduced a new virtual reality headset and a set of augmented reality glasses with holograph technology built into the lenses. It also added enhancements to its A.I. assistant and unveiled a set of A.I. tools for automatically generating videos, instantly editing them and synchronizing them with A.I.-generated sound effects, ambient noise and background music. Some of the investments have yielded unexpected hits. Sales of Meta's Ray-Ban smart glasses, which allow people to take photos, video and listen to music through the frames, have exceeded expectations and have been in demand at Ray-Ban retail stores across Europe, the company has said. Other tech giants have also spent billions on A.I. On Tuesday, Alphabet, the parent company of Google, said it spent $13 billion on capital expenditures in the third quarter -- including large investments in data centers and chips to power A.I. -- which was up 62 percent from a year earlier. "We had a good quarter, driven by A.I. progress across our apps in business," Mark Zuckerberg, Meta's chief executive, said in a statement. The company said more than 3.29 billion people use one or more of Meta's apps, which include Facebook, Instagram and WhatsApp, every day.

As Microsoft, Meta Slide After Earnings Calls, Jim Cramer Says 'Hyperscalers Are Not Warning About Worsening AI Losses' - Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META)

Jim Cramer took to social media on Thursday to address what he perceives as misleading headlines regarding AI losses. Cramer emphasized that hyperscalers are not signaling worsening AI losses but are instead thriving with AI advancements. What Happened: Microsoft Corp MSFT and Meta Platforms Inc.META witnessed their stocks plummet during after-hours on Wednesday after reporting their earnings. At the time of writing, Microsoft was down by 3.95% in premarket, while Meta shed 2.69%. Cramer criticized the lack of rigor in some reports, urging readers to delve into the actual earnings calls and analyses. He stated, "The Hyperscalers are NOT warning about worsening AI losses, they are talking about crushing it with AI." He encouraged his followers to read the calls and his team's write-ups for a clearer understanding. See Also: Google Bought YouTube For $1.65B And Now It Prints $50B In Revenue Just In 1 Year -- Sundar Pichai Says Alphabet 'Leaning Into The Living Room Experience' Why It Matters: Cramer's comments echo analyst Zev Fima's who increased the price target for Meta to $650 per share, despite a decline in the company's stock during after-hours trading. Fima highlighted the robust third-quarter results, with revenue guidance for the current quarter surpassing expectations. Microsoft recently announced that its AI business is poised to reach a $10 billion revenue milestone, marking it as the fastest-growing segment in the company's history. CEO Satya Nadella emphasized the transformative impact of AI across various business processes. Similarly, Meta is advancing its AI capabilities with its Llama 4 model, leveraging an extensive computing infrastructure. CEO Mark Zuckerberg noted the significant scale of their AI training efforts, which are expected to yield results by early 2025. Read Next: Shytoshi Kusama Touts Shiba Inu Lifetime Gains Of 33774726%: 'We Still Have Far To Go And Much Work To Be Done' Image via Shutterstock This story was generated using Benzinga Neuro and edited by Pooja Rajkumari Market News and Data brought to you by Benzinga APIs

Meta Sales Narrowly Beat on AI Boosting Advertising Revenue

(Bloomberg) -- Meta Platforms Inc. projected stronger-than-expected holiday quarter sales, and touted AI improvements to its core advertising business. But it wasn't enough to satisfy Wall Street. Meta told investors Wednesday that revenue for the current quarter would be between $45 billion and $48 billion. Analysts were expecting fourth-quarter revenue of $46 billion. Shares were little changed in late trading. The social networking giant also reported sales of $40.6 billion for the period ended Sept. 30, a jump of 19% over one year prior, and just above the $40.3 billion average estimate from Wall Street analysts. Chief Executive Officer Mark Zuckerberg credited the company's AI investments for boosting revenue. Zuckerberg has repeatedly touted the company's steep investments in AI, which has helped change investor perception about the social media company. Meta stock was up more than 67% this year at market close Wednesday, making it one of the best performing stocks in the S&P 500. Meta's key AI products include several large language models used to power chat bots, an AI assistant built into its various social apps, and AI-powered smart glasses. Even though many of Meta's longterm AI investments are still years away from contributing meaningful revenue, Meta has leaned on AI advancements to improve its ad targeting and content recommendations, which have had a more immediate impact on business results.

Meta's Earnings Top Estimates as It Lifts Spending Projections

Aaron McDade is a breaking news reporter for Investopedia. He is an experienced journalist who has covered everything from the latest in business and tech news to sports and international news like the war in Ukraine for respected outlets like Business Insider and Newsweek. Meta Platforms (META) reported third-quarter earnings that topped analysts' estimates with a boost from artificial intelligence (AI) demand, and lifted its estimates for how much money it plans to spend this year as it invests in the emerging tech. The Facebook and Instagram parent reported $40.59 billion in revenue, up from $34.15 billion the same time last year and above the $40.27 billion analysts had expected, according to estimates compiled by Visible Alpha. Meta posted $15.69 billion in net income, up from $11.58 billion and better than the $13.58 billion analysts had projected. Advertising revenue, the bulk of Meta's revenue, climbed 18.6% to $39.89 billion, just above estimates of $39.56 billion, benefitting from the tech giant's advances with AI. "We had a good quarter driven by AI progress across our apps and business," said CEO Mark Zuckerberg in a release, adding the company has also seen "strong momentum with Meta AI, Llama adoption, and AI-powered glasses." The results come as several big tech companies, including Meta, face intense pressure to show the billions of dollars they are spending on AI will boost results. The company raised the bottom range of its outlook for full-year capital expenditures to $38 billion to $40 billion, from $37 billion to $40 billion previously as Meta invests in AI. Meta said it expects revenue in the fourth quarter of between $45 billion and $48 billion, with analysts expecting about $46.34 billion. Shares of Meta edged 0.8% lower in extended trading following the release. They were up 67% for 2024 through Wednesday's close.

Meta's Q3 Earnings Disappoint Investors -- Expect Further Losses for Reality Labs

Massive investments in AI infrastructure are adding to Meta's expenses. Meta delivered relatively strong quarterly results on Wednesday, Oct. 30. But shares fell in overnight trading after the firm said spending was set to rise. Citing major investments in AI infrastructure and the loss-making Reality Labs, CFO Susan Li told investors to expect operating expense and capital expenditure to rise significantly in 2025. Meta's Spending Outlook From a previous range of $96-99 billion, Li updated Meta's full-year expense outlook to $96-98 billion. Meanwhile, the capital expenditure outlook for the year was updated from $37-40 billion to $38-40 billion. Looking ahead to 2025, she noted that Meta expects "significant" capital expenditure growth as the company accelerates its infrastructure development. Along with investing in infrastructure to support its expanding AI business, the firm's metaverse division, Reality Labs, is another source of rising costs. Reality Labs Losses In the three months to September, Reality Labs incurred $4.43 billion of losses, up more than 18% from the same period in 2023. Moreover, "we continue to expect 2024 operating losses to increase meaningfully year-over-year due to our ongoing product development efforts and investments to further scale our ecosystem," Li observed. After years of research and development, however, the division is starting to generate more income. Year-over-year, quarterly revenues were up 19%, just outpacing the rate at which its losses have grown. Turning to Reality Labs' recent successes, CEO Mark Zuckerberg highlighted a strong demand for Meta's smart glasses. "I continue to think that glasses are the ideal form factor for AI," he observed, "because you can let your AI see what you see, hear what you hear, and talk to you." Meta Shares Slide in After-Hours Trading Despite surpassing revenue expectations, Meta shares fell slightly in after-hours trading, declining nearly 1% following Wednesday's earnings call. While concerns over rising expenses may have spooked investors, declining user growth is another factor weighing on Meta's stock price. The company reported 3.29 billion daily users, up 5% from a year ago but still fewer than many analysts had expected.

Meta's third-quarter profit surges 35% reflecting strong ad revenue and its AI push

Meta Platforms Inc. has posted stronger-than-expected third-quarter results fueled by its advertising revenue growth and its push to incorporate artificial intelligence Meta Platforms Inc. posted stronger-than-expected third-quarter results on Wednesday fueled by its advertising revenue growth and its push to incorporate artificial intelligence. But the Instagram and Facebook parent company warned that it expects a "significant acceleration" in infrastructure spending next year as it continues to pour money into developing AI. For the three months ended on Sept. 30, the Menlo Park, California-based company earned $15.69 billion, or $6.03 per share, up 35% from $11.58 billion, or $4.39 per share, in the same period a year earlier. Revenue rose 19% to $40.59 billion from $34.15 billion. Analysts, on average, were expecting earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research. "We had a good quarter driven by AI progress across our apps and business," CEO Mark Zuckerberg said in a statement. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." For the current quarter, Meta is forecasting revenue of $45 billion to $48 billion. Analysts are expecting $46.18 billion. "Meta's solid quarter adds further evidence to the view that digital advertisers are choosing to spend their budget on the so-called market leaders, such as Facebook and Instagram, at the expense of the smaller social media networks, like Snap," said Investing.com analyst Jesse Cohen. Cohen added that while AI is "clearly driving growth" at Meta, "investors appear to be disappointed over the company's forward guidance and rising costs needed to develop AI features." Meta said it expects 2024 operating losses at its Reality Labs segment -- which includes its virtual- and augmented-reality glasses -- will "increase meaningfully" due to product development costs and other investments. Last Month, Meta teased a prototype for Orion, the holographic augmented reality glasses it's been working on for a decade. But Orion doesn't have a release date yet, in large part because it is currently so expensive to make. Zuckerberg called it a "glimpse of the future." Meta's shares slipped about 2% in after-market trading following the earnings report.

Meta Sales Narrowly Beat on AI Boosting Advertising Revenue

Meta Platforms Inc. projected stronger-than-expected holiday quarter sales, saying that the company's heavy investments in artificial intelligence have also helped to improve its core advertising business. Meta told investors Wednesday that revenue for the current quarter would be between $45 billion and $48 billion. Analysts were expecting fourth-quarter revenue of $46 billion.

Meta Crushes Wall Street Earnings Estimates As It Ramps Up AI Spending

NBA Star Anthony Edwards' Three-Fifths Media Inks Unscripted TV Deal With Wheelhouse (Exclusive) Meta Platforms Inc., the owner of Facebook, Instagram and WhatsApp, handily beat Wall Street estimates in its third-quarter earnings, delivering revenue of $40.6 billion, net income of $15.7 billion and earnings per share of $6.03, all up substantially from 2023. The Street had been targeting revenue of $40.3 billion and EPS of $5.25. However, the company also reiterated that it expects to grow its spending over the next year as it leans into artificial intelligence, warning investors that "given this, along with the back-end weighted nature of our 2024 capital expenditures, we expect a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet." The company also warned that regulatory efforts in the U.S. and E.U. "could significantly impact our business and our financial results." "We had a good quarter driven by AI progress across our apps and business," said Mark Zuckerberg, Meta founder and CEO. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses."

Meta beat Wall Street expectations with 35% profit growth

Bitcoin's rise is predicting a Donald Trump election victory, strategist says Meta saw $15.69 billion billion in net income last quarter, or $6.03 per share, up from $11.58 billion in the same quarter last year, the company reported after the markets closed on Wednesday. Wall Street had expected $13.49 billion in profit, or $5.21 per share, according to estimates compiled by FactSet. Revenue came in at $40.59 billion, up from $34.15 billion a year ago and surpassing Wall Street's estimated $40.19 billion for the quarter. "We had a good quarter driven by AI progress across our apps and business," said Mark Zuckerberg, Meta founder and CEO. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." The Menlo Park, California-based company is looking to show off its growth after making big investments in artificial intelligence. This year alone, the company's total spending is expected to hit between $35 billion and $40 billion, driven in large part by burgeoning AI costs, including data centers, chips, and research and development. Mark Zuckerberg showed the impact of some of those investments at the company's annual Connect conference in September. Zuckerberg said Meta AI is on track to become the most-used AI assistant in the world by the end of this year, with almost 500 million monthly active users as of today. Meta added the AI assistant to its popular social media platforms, including Instagram and Facebook, in April. At the event, Zuckerberg also announced Llama 3.2, Meta's first open-source, multimodal large language model (LLM). The CEO said that the AI industry has reached an inflection point and that Llama has become "something of an industry standard." This enthusiasm has fueled a strong year for the company, with shares up more than 70% year-to-date. Meta is also reportedly building its own search engine to supply answers to its chatbot, in an effort to reduce its reliance on Google (GOOGL+2.86%) and Microsoft (MSFT+0.23%), according to The Information. Bank of America (BAC-0.46%) said in an Oct. 28 note that this would be "consistent with Meta's long-term goal to reduce dependence on competitor platforms & technology," and that it expects an announcement on new AI and search capabilities in Meta's third-quarter earnings call. Bank of America analysts added, however, that Meta's search engine would "be at a data and web scraping disadvantage" compared to Google due to a "limited number of Meta AI users."

Meta's stock heads south on slow user growth and ongoing infrastructure investments - SiliconANGLE

Meta's stock heads south on slow user growth and ongoing infrastructure investments Shares of Facebook parent company Meta Platforms Inc. were heading lower in late-trading today after the company reported lower-than-expected user numbers and revealed plans to ramp up its data infrastructure spending in fiscal 2025. The disclosures came as Meta revealed its fiscal 2024 third quarter financial results, delivering a solid beat on both earnings and revenue. The company said its earnings before certain costs such as stock compensation came to $6.03 per share, well ahead of the analyst's $5.25 per share target, while revenue jumped 19% to $40.59 billion, above the $40.29 billion consensus estimate. Meta also reported net income of $15.7 billion in the quarter, rising from a profit of just $11.6 billion one year earlier. But although the 35% increase in profitability looks good, it's actually the slowest rate of growth for that metric since the second quarter of fiscal 2023. Although the financials look good, investors were more concerned about Meta's user growth. The company said it had 3.29 billion daily active users across apps such as Facebook, Instagram and Whatsapp at the end of the quarter, up 5% from a year ago but below the Street's target of 3.31 billion. Investors also appear to be concerned about the scale of Meta's ongoing investments in the data center infrastructure it needs to support its ambitions in artificial intelligence. The company raised its capital expenditure guidance for fiscal 2024 to a range of $38 billion to $40 billion, up from an earlier estimate of $37 billion to $40 billion. In addition, Meta said it expects those expenses to "grow significantly" in fiscal 2025, as its infrastructure expansion plans accelerate. "Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too," Meta founder and Chief Executive Mark Zuckerberg (pictured) said on a conference call with analysts. Meta's infrastructure build out has seen it spend billions of dollars on Nvidia Corp.s' advanced graphics processing units, as well as other data center equipment that's needed to power AI models like Llama. It has also been spending money on hardware to try and bolster its core advertising business, which was disrupted by Apple's 2021 iOS privacy update. According to Zuckerberg, more than one million advertisers are now using Meta's generative AI technology to improve targeting and generate more compelling ads. Wall Street investors are said to be increasingly concerned that tech giants like Meta, Microsoft Corp. and Alphabet Inc. are spending too much money on infrastructure spending without seeing any immediate returns on those investments. Zuckerberg acknowledged this himself in an interview with Bloomberg in July, when he admitted that some companies might be "overbuilding now". However, he justified it by saying the risk of underinvesting is too great. On the conference call, he once again reiterated the necessity of building out Meta's data centers. "The formula around building out the infrastructure is maybe not what investors want to hear in the near term," he said. "But, I just think that the opportunities here are really big, we're going to continue investing significantly in this and I'm proud of the teams that are doing great work to stand up a large amount of capacity so that way we can deliver world-class models and world-class products." Despite the increased capital expenditures, Meta's said it's now forecasting its total expenses for fiscal 2024 to come to between $96 billion and $98 billion, down from its earlier guidance range of $96 billion to $99 billion. As always, investors were keen to hear about the health of Meta's advertising business, and the results were a bit of a mixed bag. The company said its advertising revenue grew by 19% from a year earlier to $39.9 billion, accounting for 98.3% of the company's total sales in the quarter. There were concerns about ad spending in the Asia-Pacific region, though. Revenue there increased 15% during the quarter, down from growth of 28% sequentially. According to Meta's chief financial officer Susan Li, this deceleration was due to "lapping demand" from Chinese advertisers such as the online retail giants Temu and Shein, which have slashed their digital ad spending budgets. As always, Meta's Reality Labs business, which houses its metaverse and virtual reality initiatives, continued to bleed cash. It posted an operating loss of $4.4 billion in the quarter, though this was lower than the analyst forecast of a $4.68 billion loss. Its sales jumped 29% from a year earlier to $270 million, lower than the $310.4 million analyst forecast. The latest numbers mean that Reality Labs has now delivered a total operating loss of more than $58 billion since it was founded in 2020. Looking to the fourth quarter, Meta said it's eying total revenue of between $45 billion and $48 billion, with the midpoint of that range coming in just ahead of the Street's target of $46.3 billion. All told, it seemed investors were a little disappointed with Meta's report, as the company's stock fell just over 3% in the after-hours trading session.

Meta's third-quarter profit surges 35% reflecting strong ad revenue and its AI push

Meta Platforms Inc. posted stronger-than-expected results for the third quarter on Wednesday as its advertising revenue continued to grow. For the three months ended on Sept. 30, the Menlo Park, California-based company earned $15.69 billion, or $6.03 per share, up 35% from $11.58 billion, or $4.39 per share, in the same period a year earlier. Revenue rose 19% to $40.59 billion from $34.15 billion. Analysts, on average, were expecting earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research. "We had a good quarter driven by AI progress across our apps and business," CEO Mark Zuckerberg said in a statement. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." For the current quarter, Meta is forecasting revenue of $45 billion to $48 billion. Analysts are expecting $46.18 billion. But the Instagram and Facebook parent company warned that it expects a "significant acceleration" in infrastructure spending next year.

Meta rides AI boom to stellar quarterly earnings, but slightly less than expected

Company beats financial predictions but does not increase daily users as much as Wall Street thought it might Meta's blowout year continues after the company reported another stellar financial quarter on Wednesday. Shares fell in after-hours trading. Wall Street analysts had high expectations for the Instagram and WhatsApp parent company, projecting an 18% jump in sales year over year. The company reported $40.6bn in sales, a 19% increase year over year that outpaced investor expectations of $40.19bn. Meta, which saw a 25% jump in its share price over the past two months, reported $6.03 in earnings per share (EPS), surpassing Wall Street's expectations of an EPS of $5.29. The company reported that its number of daily users was worse than analysts expected, notching 3.29bn "daily active people" versus an anticipated 3.31bn. "We had a good quarter driven by AI progress across our apps and business," said Mark Zuckerberg, Meta's chief executive, in the press release announcing the earnings. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." The company said it expects its revenue to grow to between $45bn and $48bn in the fourth quarter. The social media firm has been ramping up its investment in AI, and analysts are bracing for a spike in company-wide spending as a result. Meta's guidance indicated capital expenditure could hit between $38bn and $40bn in 2024 and reach up to $50bn in 2025. But that investment may already be paying off. Zuckerberg said that Meta AI is on track to be the most-used AI assistant in the world with nearly 500 million monthly active users. The button to access Meta AI has been built into the search bar in the Instagram and Facebook apps. The company released its latest AI model, called Llama 3.1 405B, in July. Earlier this month, it announced an AI video maker, Movie Gen, that can generate footage with sound. The company is also expanding its hardware line. At its annual developer conference in September, Meta debuted a prototype of a new augmented reality headset called Orion. The company's latest entry into the smart-eyewear game can project digital representations of media, people, games and communications onto the real world. The Facebook-parent company also debuted the Quest 3s, a more affordable addition to the company's line of mixed-reality headsets, which hit shelves earlier this month. The company continues to face legal pressure for the effects of its products on children's mental health and safety, including a 2023 lawsuit filed by dozens of state attorneys general that alleges the company knowingly makes its platforms addictive to teens. However, the company secured a recent victory when a judge dismissed a shareholder lawsuit claiming the company misled them about its ability to ensure the safety of children on the platform. In September, Meta announced that the accounts of all Instagram users under 18 would be made private by default.

Meta's Third-Quarter Profit Surges 35% Reflecting Strong Ad Revenue and Its AI Push

Meta Platforms Inc. posted stronger-than-expected results for the third quarter on Wednesday as its advertising revenue continued to grow. For the three months ended on Sept. 30, the Menlo Park, California-based company earned $15.69 billion, or $6.03 per share, up 35% from $11.58 billion, or $4.39 per share, in the same period a year earlier. Revenue rose 19% to $40.59 billion from $34.15 billion. Analysts, on average, were expecting earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research. "We had a good quarter driven by AI progress across our apps and business," CEO Mark Zuckerberg said in a statement. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." For the current quarter, Meta is forecasting revenue of $45 billion to $48 billion. Analysts are expecting $46.18 billion. But the Instagram and Facebook parent company warned that it expects a "significant acceleration" in infrastructure spending next year. Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Meta's third-quarter profit surges 35% reflecting strong ad revenue and its AI push

Meta Platforms Inc. posted stronger-than-expected results for the third quarter on Wednesday as its advertising revenue continued to grow. For the three months ended on Sept. 30, the Menlo Park, California-based company earned $15.69 billion, or $6.03 per share, up 35% from $11.58 billion, or $4.39 per share, in the same period a year earlier. Revenue rose 19% to $40.59 billion from $34.15 billion. Analysts, on average, were expecting earnings of $5.22 per share on revenue of $40.21 billion, according to FactSet Research. "We had a good quarter driven by AI progress across our apps and business," CEO Mark Zuckerberg said in a statement. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." For the current quarter, Meta is forecasting revenue of $45 billion to $48 billion. Analysts are expecting $46.18 billion. But the Instagram and Facebook parent company warned that it expects a "significant acceleration" in infrastructure spending next year.

Meta tops revenue targets but warns of 'significant' cap ex spending next year

Shares of the Facebook parent fell almost 3% in after hours trading immediately after revealing its third quarter results. Nevertheless, Meta said revenue for the quarter grew 19% year-over-year, to $40.59 billion, above analysts' expectations. Net income rose 35% to $15.68 billion, and earnings per share came in $6.03, also above expectations. The total number of people using one of Meta's apps each day, including Facebook, Instagram and WhatsApp, grew by 5% to 3.29 billion. Meta's CEO Mark Zuckerberg has emphasized the company's focus on cost discipline, describing an ongoing effort at "efficiency." Operating expenses growth of 13% during the quarter was slower than the company's revenue growth, helping lift Meta's operating profit margins to 43% versus the 40% level one year ago. Yet Meta's Reality Labs, the organization within Meta responsible for VR and AI work, lost a whopping $4.42 billion in the third quarter, up 18% from a year ago, and Meta warned that it expected the divison's "operating losses to increase meaningfully." The company lifted the bottom-end of its planned capital expenditures range for the year, forecasting a cap ex between $38 billion to $40 billion, up from the previously guided range of $37 billion to $40 billion. And the company warned that it would continues to expect "significant capital expenditure growth in 2025." CFO Susan Li said that revenue in the fourth quarter should ranged between $45 billion and $48 billion, representing 12% to 20% growth from the prior year. In a prepared statement, CEO Mark Zuckerberg said: "We had a good quarter driven by AI progress across our apps and business. We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses."