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Meta had 3.27 billion users across all of its apps as of June 30, up 7% from a year earlier. | Image: Bloomberg
Meta Platforms Inc. reported better-than-expected sales in the second quarter on Wednesday, signaling that the company’s investments in artificial intelligence are helping it sell more targeted ads. Shares jumped in Thursday trading.
That progress is buying Chief Executive Officer Mark Zuckerberg more time to prove that his bets on the metaverse and AI are worth their while. In a call with investors and analysts on Wednesday, he expounded on Meta’s push into the type of large language models that power AI chatbots and praised the company’s AI smart glasses and virtual reality headsets.
“There are all the jokes about how all the tech CEOs get on these earnings calls and just talk about AI the whole time,” he said. “It’s because it’s actually super exciting and it’s going to change all these different things over multiple time horizons.”
Meta has been using AI to improve the way its advertisers can find interested users, adding efficiency to its most lucrative business. More specifically, the company is using algorithms to better determine when and where to show ads. It’s also starting to roll out generative AI features so that marketers with small budgets can create more interesting promotions.
AI will “end up affecting almost every product that we have in some way,” he said.
Meta had 3.27 billion users across all of its apps as of June 30, up 7 per cent from a year earlier. The company’s shares jumped as much as 10 per cent after trading opened in New York on Thursday, adding $123 billion in market value. This is the stock’s biggest intraday gain since February.
Meta has been spending heavily on data centers and computing power as Zuckerberg works to build a leading position in the industry-wide AI race. The company tweaked its full-year projections for capital expenditures, setting a new forecast of $37 billion to $40 billion, raising the low end of an earlier range by $2 billion.
Meta recently unveiled its largest model to date, which Zuckerberg said cost hundreds of millions of dollars in computing power to train. The company has also spent heavily on other long-term projects, including AI-powered smartglasses and a series of virtual worlds known as the metaverse. Reality Labs, the division within Meta tasked with building these futuristic technologies, reported a loss of nearly $4.5 billion on the quarter.
Balancing investment with the more immediate need for financial returns has been a challenge at times for Meta. Zuckerberg has made moves to support Meta’s stock performance — including job cuts, a $50 billion share buyback program and Meta’s first-ever quarterly dividend — while remaining clear that the company’s spending will continue to rise. The company said in a release Wednesday that it plans to increase capital expenditures “significantly” as it invests in AI research and product development.
There are some early signs that the AI-focused products are gaining popularity, though not necessarily contributing to the company’s bottom line. Zuckerberg said that the Meta AI chatbot is on pace to become the most widely used AI assistant in the world by the end of the year. Eventually, he said, he believes that every business will need one — if not multiple — AI-powered chatbots to handle customer service queries and interactions.
Demand for Meta’s smart glasses, which are built via a partnership with EssilorLuxottica’s Ray-Ban, is outpacing the company’s ability to build them, he said.
Zuckerberg said in April that “smart investors” would see the long-term promises of artificial intelligence and metaverse technology, even if the financial returns are years away. Earlier this month, he told Bloomberg investing too much would be better than investing too little.
“I think that there’s a meaningful chance that a lot of the companies are over-building now, and that you’ll look back and you’re like, ‘Oh, we maybe all spent some number of billions of dollars more than we had to,’” Zuckerberg said. “On the flip side, I actually think all the companies that are investing are making a rational decision, because the downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years.”
Through Wednesday, Meta shares had risen 34 per cent this year.
First Published: Aug 01 2024 | 9:50 PM IST