Meta's AI Ambitions: Zuckerberg's Vision Clashes with Reality

Mark Zuckerberg wants Meta to be something new. It's still just an ad company

Mark Zuckerberg may see the world through AI-powered Ray-Bans, but Wall Street just sees it through his company's ad dollars. And while he's trying to look beyond the feed to a future with talking glasses and immersive virtual worlds, investors are hoping he'll stick with what his company does best. The Meta (META) CEO continues to deliver solid results for the company; it just reported first-quarter 2025 earnings, with a 16% year-over-year increase in revenue, a 37% rise in earnings per share, and a staggering 89% profit increase on 27% revenue growth. But Zuckerberg crucially seems to misunderstand what people want -- which isn't walking around with a virtual reality headset glued to their heads. Meta is, first and foremost, still an advertising company. Its ad business, particularly on its platforms such as Facebook, Instagram, and WhatsApp, drove the company's first-quarter growth. Ad impressions were up 5%, and the average ad price increased 10% year-over-year. Chief financial officer Susan Li noted on the first-quarter earnings call that the online commerce vertical led the way for the company as the largest contributor to year-over-year growth. AI tools are enhancing Meta's targeting capabilities, but ultimately, they serve the same purpose: helping advertisers find -- and monetize -- eyeballs. There was only a single quote from Zuckerberg in the press release accompanying the earnings report -- and it referenced AI glasses, not ad performance. He said that this was an important year, Meta's community is growing, the business is performing very well -- and, "We're making good progress on AI glasses and Meta AI." Zuckerberg clearly still envisions a future where Meta looks like it's something straight out of a science fiction novel, but that just isn't the case. And the earnings back that up. The company's Reality Labs division, home to Meta's augmented and virtual reality initiatives, is a massive drain. It reported a first-quarter operating loss of $2.96 billion on $695 million in revenue. The division's operating loss was $4.2 billion. Since 2020, Reality Labs has burned $60 billion -- with nothing really to show for it. Horizon Worlds, Meta's social VR playground-like platform where users can build and interact in shared virtual environments, hasn't seen much momentum, and neither has Horizon Workrooms, which brings remote collaboration into VR. And while Meta has a good hold on the headset market with its Quest VR headset line, the headsets haven't broken through to a mainstream audience. Zuckerberg said on the first-quarter earnings call that the company is, however, "seeing deeper engagement as Quest 3S makes VR accessible to more people, and more people are creating experiences in Horizon with AI tools." So regardless of the numbers and all the accompanying data, signs suggest that Zuckerberg still sees a future built around the metaverse -- and its smart glasses. He claimed on the earnings call that Meta's glasses partnership with Ray-Ban has "tripled in sales" year-over-year, and there's a plan to ramp production to 10 million units annually. The glasses are now integrated with Meta's standalone app and its Llama 4-powered AI assistant. "I think that we're all going to have an AI that we talk to throughout the day," Zuckerberg said. "Eventually, that'll be on glasses." He continued, "Glasses are the ideal form factor for both AI and the metaverse. ... More than a billion people worldwide wear glasses today, and it seems highly likely that these will become AI glasses over the next five to 10 years." But the reality doesn't quite match the hype. In 2022, Zuckerberg predicted that augmented reality glasses would become commonplace in three to five years. Now, almost three years later, Meta has sold just over two million units of its smart glasses partnership with Ray-Ban -- hardly commonplace. So it's far from clear that glasses -- or Zuckerberg's broader metaverse vision -- will become a real business anytime soon. Others in the company seem to see that the end of Reality Labs is nigh. Last week, Meta conducted layoffs in the division, primarily affecting teams that focused on VR gaming and the Supernatural VR fitness app. Earlier this year, Business Insider reported on a leaked memo from Meta's chief technology officer that said 2025 would either prove that the metaverse "will go down as the work of visionaries or a legendary misadventure." But it's unclear whether Zuckerberg will let the division fall to pieces. This is the guy who, almost three years ago, declared that Meta was now "a metaverse company" that would focus on building the future of social connection through virtual and augmented reality. Investors and other top Meta executives might encourage more of a pivot away from Zuckerberg's lofty visions even further toward a more concrete revenue stream: AI. The CEO said on the earnings call that "the major theme right now, of course, is how AI is transforming everything we do." Projected capital expenditures have risen to as much as $72 billion for 2025, largely to fund AI infrastructure. And a lot of what Meta has done with AI goes back to, yes, advertising. The company has leveraged AI to enhance ad targeting, creative generation, and campaign optimization. AI has made Meta's ad machine even more efficient. AI-generated creative tools saw 30% more usage this quarter, and a recommendation model being tested for Reels has boosted conversion rates by 5%. Meta is evolving, but it's evolving using the same core business model: better and smarter ads. CFO Li said Meta is seeing strong adoption of its AI-driven ad products such as Advantage+ and Advantage+ creative. This week, she said, Meta will expand video tools for advertisers on Facebook Reels, allowing automatic resizing of videos using AI-generated pixels for full-screen formats. The company has also launched image generation for all eligible advertisers and plans to test a generative AI-powered virtual try-on feature that displays clothing on virtual models. "AI has already made us better at targeting and finding the audiences that will be interested in [businesses'] products," Zuckerberg said on the call. "I think that this is really redefining what advertising is -- into an AI agent that delivers measurable business results at scale." He added, "If we deliver on this vision, then over the coming years, I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today." For now, the chunk of Meta's business that is efficient, structured, and immensely profitable is still advertising. Meta AI is becoming increasingly important and shows plenty of promise. Maybe smart glasses and the metaverse will one day matter. But what matters right now are the billions of ads being served across the company's family of apps that are increasingly shaped by AI -- but are still firmly rooted in a business model that's nearly two decades old. Zuckerberg wants Meta to reinvent how we interact with technology. But until the glasses -- and everything they represent -- catch on, he's still selling us the same thing: our attention, optimally priced and algorithmically delivered. As long as Meta keeps finding ways to help advertisers reach its vast user base, investors might be happy to let Zuckerberg keep dreaming about the future. They just want him to keep the ad dollars flowing in the meantime.

Mark Zuckerberg's Banal AI Vision

Meta, along with a few of its other peers in big tech, is in an enviable place. Like Google and Microsoft, its core business -- in Meta's case, advertising across its popular platforms - is doing extremely well. Also like Google and Microsoft, however, it's investing breathtaking amounts of money in AI and openly imagining a near-term scenario in which its core business instead revolves around products and consumer habits that haven't yet come into view. Meta can afford to make these investments now because it's raking in cash: it made more than $16 billion of profit last quarter, which puts its plan to spend "$64 billion to $72 billion" this year on capital expenditures, mostly meaning AI, into perspective. As for how it'll make that money back in the future, the company has been vague, even by the low-clarity standards of the AI race. It's easy enough to imagine how Microsoft, a company that makes most of its money from productivity software, might sell AI assistants. Meta, on the other hand, has historically made money selling ads on platforms where human beings interact with each other about things they care about as people. Where do chatbots fit into that, and how might they be worth tens of billions of dollars? In an interview with Dwarkesh Patel, Zuckerberg finally tried to explain. AI is "almost certainly going to unlock this massive revolution in knowledge work and code," he said, mentioning that companies like Anthropic and OpenAI were targeting enterprise customers. "I also think it's going to be kind of the next generation of search and how people get information and do more complex information tasks," he said, disclosing that most of Meta's current AI use happens in WhatsApp, where people -- mostly non-Americans -- use it like ChatGPT. But the real case use for AI within Meta will arrive on more familiar terrain, Zuckerberg argues, describing human interaction as only the longtime head of the world's leading attention conglomerate could: I also think it's going to be fun. I think people are going to use it to be entertained. And, you know, a lot of the internet is like memes and humor, right? And we have this like amazing technology at our fingertips and it is sort of amazing and kind of funny when you think about it, how much of human energy just goes towards entertaining ourselves and pushing culture forward and finding humorous ways to explain cultural phenomena that we observe. I think that that's almost certainly going to be the case in the future, right? Delivery aside, Zuckerberg's claim here is pretty straightforward: For Meta, AI is a way to produce and allow users to engage with content, and a way to extend the ways that people already use its platform. Some of this content will resemble direct human interactions, while other content will resemble media. Zuckerberg says that despite current stigmas, people will become more comfortable interacting with chatbots in personal ways, and that "we will find the vocabulary as a society to be able to articulate why that is valuable." (This is plausible, but so is a scenario in which the "vocabulary" society finds is that of pathology and addiction. To monetize, Meta will mostly just do what Meta already does. "For the consumer piece, we definitely want to have a free thing," Zuckerberg said. "And I'm sure that will end up being ad-supported." As for what these ad-supported and AI-enhanced feeds might eventually look like Zuckerberg got speculative: You'll be scrolling through your feed and there will be content that is basically, I don't know, maybe it looks like a Reel to start, but then you talk to it or you interact with it, and it talks back or it changes what it's doing or you can jump into it like a game and interact with it... that's all going to be AI. It's worth backing up and trying to see the world -- or at least Meta's products -- as Zuckerberg might. In recent years, driven in part by the popularity of TikTok, social media has shifted away from the social and into media, gradually turning platforms founded on user interactions into more passive channels for consumption. In a recent testimony during the FTC's antitrust trial against Meta, highlighted by The New Yorker, the company shared that the "percent of time spent viewing content posted by 'friends'" had declined to just 17% on Facebook and 7% on Instagram, and that the company's platforms served "the general idea of entertainment and learning about the world and discovering what's going on." That people aren't using public social platforms to communicate with one another is something Meta might see as a problem AI could solve; that people are instead using social media to consume lots of content is something Meta might see as an opportunity that AI could be used to exploit further. (The company is also approaching AI social media from the other direction; it included a "Discover feed" in a standalone chatbot app launched this week.) Taken together, this vision is indeed "kind of funny when you think about it." Zuckerberg imagines media platforms in which other people are augmented or replaced by chatbots trained on their collective data, with all parties involved coming together to engage with content produced by AI tools trained on "cultural phenomena," in a space arranged according to opaque and automatic logics. It might seem like a strange destination for the company that built its empire on real-name social networking, but it can also be understood, less fantastically, as the culmination of years of optimization and automation in pursuit of content that's cheaper, more plentiful, better targeted, and more engaging. What is an algorithmic newsfeed, or an infinite scroll of Reels, if not the automation of formerly human curation? What is Facebook AI slop if not the platform's remaining participants identifying and meeting user demands with automation? With fewer friends posting on Instagram, and those still present engaging primarily in private consumption, what is a "Like" if not a signal for an automated system, an interaction with a machine that "talks back or changes what it's doing" by showing you more? Meta's AI strategy less resembles a bet on an unrecognizable future than a belief, or a wish, that it can simply be Meta, but more so. (It's also a bet that Large Language Model-based AI will present more opportunities for entertainment than for work.) Zuckerberg isn't just envisioning a Meta staffed by AI engineers and AI moderators, but platforms that stock themselves with content, allow users to request whatever types of interactions they want, and are even more effective at holding attention, keeping people engaged, and, of course, serving and targeting advertising.