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Mark Zuckerberg has reignited investor fears that he won't control Meta's costs after vowing to increase spending and transform the social media group into “the world's leading AI company.” The company's shares fell more than 15% in after-hours trading Wednesday.
Revenue for the company, which operates platforms such as Facebook, Instagram and WhatsApp, rose 27% to $36.5 billion in the first three months of 2024, slightly below analysts' expectations of $36.2 billion, according to Meta's earnings release. exceeded.
But Meta also raised its full-year capex outlook to $40 billion from $37 billion as it “continues to accelerate infrastructure spending to support its artificial intelligence (AI) roadmap.” Capital investment spending last year totaled $28.1 billion.
It predicted that capital spending would continue to rise next year and raised the lower end of its 2024 spending forecast from $94 billion to $96 billion. The company expects sales for the current quarter to be in the range of $36.5 billion to $39.0 billion, compared to the consensus estimate of $38.3 billion.
Last year, Zuckerberg sought to keep Wall Street happy amid tough macroeconomic conditions, cutting jobs, cutting costs and branding 2023 the “year of efficiency.”
But he is under increasing pressure to keep up in the fast-moving AI race with Silicon Valley groups such as OpenAI, Microsoft and Alphabet's Google, so he needs They are under pressure to increase investment in expensive technology and infrastructure. Microsoft and Alphabet are scheduled to provide updates on their AI efforts during Thursday's earnings calls.
Zuckerberg said on a conference call with analysts that he believes Meta will “need to invest significantly over the next few years to build even more advanced models and the world's largest AI service.” Stated. He added: “This spending will need to increase significantly in order to get much revenue from these new products.”
The after-hours decline in Meta stock wiped out billions of dollars in its market value. That's steep for the stock, which was up more than 40% this year at record levels since announcing its first dividend in February and announcing a strong fourth-quarter earnings report that signaled a strong recovery from recent advertising. This is a reversal. slump.
As part of its efforts to develop and integrate AI tools into its products, Meta is focused on bringing chatbots to social media apps to increase engagement, features for advertisers, and improved feed targeting. . This month, the company announced it released a new version of the AI model behind its chatbot, Llama 3, with significantly improved inference capabilities and other features. Meta also announced a new generation of AI custom-made chips.
In his opening remarks to investors on Wednesday's earnings call, which saw the stock continue to fall, Mr. Zuckerberg sought to allay investors' concerns about the spending by pointing to the company's “strong track record” of monetization. .
To bring in revenue, Meta can expand business messaging, introduce advertising to user interactions with AI chatbots, and charge groups for use of larger AI models, he said.
Zuckerberg also said Meta will continue to invest in its long-term ambitions to build a metaverse filled with avatars and will focus on developing what he calls “wearable AI,” or smart glasses with built-in AI assistants. Then he said.
Reality Labs, Meta's virtual reality and augmented reality division, posted a loss of $3.85 billion in the first quarter, about the same as a year earlier, but the company said its operating loss would be “significantly higher” year over year. He added that he continues to expect this.
“Mark Zuckerberg's 'Heads Up' reminded me of what he once said about the Metaverse. It didn't necessarily work out, but this is different from Meta's metaverse gamble because AI has real, practical use cases,” said Mike Proulx, research director at Forrester.
“Questions remain as to whether Meta will be able to participate in the AI race while maintaining a strong financial position. To do so, more “Metaverse” resources will be diverted from Reality Labs to Meta’s AI initiatives. It is expected,” he added.