Meta Announces Robust Worldwide Ad Revenues While Controlling AI Expenses.

(VOR News) – On Wednesday, Meta Platforms reported revenue for the second quarter that was higher than expected by the market and gave a promising sales estimate for the upcoming third quarter.

This implies that a significant amount of digital advertising on the company’s social media platforms could offset its artificial intelligence efforts.

Meta’s shares increased 6.8% after the bell.

The parent company of Facebook and Instagram has estimated third-quarter sales in the range of $38.5 billion to $41 billion, according to LSEG statistics. The middle of this range exceeds analysts’ projections of $39.1 billion.

Compared to expert estimates of $38.3 billion, Meta reported a 22% increase in revenue to $39.1 billion for the April to June quarter.

Chief Financial Officer Susan Li of Meta stated during a conference call with analysts that the company was “continuing to see healthy global advertising demand” and that it was also profiting from a multiyear project that used artificial intelligence to improve the targeting, ranking, and delivery systems for digital ads on its platforms.

According to Li and CEO Mark Zuckerberg, these tools will keep the company growing over the next two years, but it will take longer to monetise new generative AI capabilities like chat assistants.

The value of shares of the social media app Snap, which likewise heavily depends on digital advertising, increased by 3% as a result of the Meta report.

According to eMarketer analyst Max Willens, “this quarter’s results are expected to alleviate any concerns investors may have had regarding Meta’s expenditures on AI and the metaverse.”

“With its margins as healthy as they are, Meta’s investors should feel comfortable with the company’s vigorous investments in its plans for the future,” Willens said.

Meta’s revenue grew by a lot despite its costs going up by 7%.

Consequently, the operating margin increased from 29% to 38%. The number of unique users who open any of the company’s applications on a daily basis is tracked by the family daily active people (DAP) statistic, which climbed by 7% annually to an average of 3.27 billion in June.

The underwhelming results from other tech industry heavyweights, which suggested that Wall Street may not get its money back as quickly from large investments in AI technology, contributed to Meta’s earnings.

Microsoft declared on Tuesday that it will devote more money this fiscal year to the creation of AI infrastructure. Google’s parent company, Alphabet, warned last week that it will continue to increase its capital spending for the balance of the year.

Like both of those businesses, Meta has been pouring billions of dollars into its data centres in an attempt to leverage the expansion of generative AI. When the corporation revealed an expense prediction that was higher than anticipated in April, the stock market value of the company fell by $200 billion.

This signalled the end of a run of profitable quarters for Meta, which has since bounced back from a 2022 share price crash by cutting costs and riding the wave of investor interest in generative AI technologies.

She called Meta’s findings a bellwether.

“AI investments by companies will be viewed favourably if they can demonstrate robust results from their core businesses.” “The stock may appear more risky if the core business is showing signs of weakness, as we observed last week with Alphabet’s YouTube,” she said.

Over the past year, Meta has hired more AI developers, even as it has continued to covertly disband teams in other places. Li said on Wednesday that there had been a 1% annual decline in the company’s employment. She did, however, expect the head count to be “significantly higher” by year’s end.

Moreover, the massive social media company said it would continue to make significant investments in AI technology. Its capital expenditure estimates for 2024 are expected to be between $37 billion and $40 billion, which is a $2 billion increase from its earlier estimate of $35 billion to $40 billion.

Even if the total spending estimate for 2025 has been kept at $96 billion to $99 billion, infrastructure costs will still be a “significant driver” of expense rise.

Additionally, it said that losses related to the business’s metaverse division, Reality Labs, which creates augmented reality glasses, smart glasses including Ray-Bans from EssilorLuxottica, and virtual reality headsets, would continue to “increase meaningfully.”

Reality Labs lost over $4.5 billion in the second quarter of this year, even though Meta executives have said that the most recent version of the smart eyewear was more successful than expected. Li largely credited the sales of its Quest virtual reality headsets for the unit’s revenue growth.

SOURCE: TETN

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