The old saying goes that to make money, you have to spend money.
For Meta, which reported record-breaking third-quarter earnings, its long-term artificial intelligence (AI) roadmap requires billions of dollars in capital investment over the next year and beyond, as yet undefined. That fact doesn’t change.
Investors pushed the stock down 3% in after-hours trading on Wednesday (October 30) on expectations that profit margins would be tight.
This record resulted in sales of approximately $40.6 billion, an increase of 19% from the previous year.
Regarding the core business, total advertising revenue was $39.9 billion, compared to $33.6 billion in the prior year, according to the revenue supplement. Ad impressions grew 7% year over year worldwide. Last year, the increase was 21%. Average price per ad was 11%, up slightly from 10% in Q2. The company reported a 5% increase in daily active users to approximately 3.29 billion.
CEO Mark Zuckerberg said on a conference call with analysts that the push for AI will be tied to “critical infrastructure.” This infrastructure development will require the company to “continue to make significant investments,” but the executive also said that the company has not yet decided on a “final budget.”
With 2025 looming, Zuckerberg and Chief Financial Officer Susan Lee said on the call that capital spending in 2024 will be around $38 billion to $40 billion, with the lower end of the range becoming tighter. said. Forward-looking estimates of $45 billion to $48 billion in fourth-quarter sales imply approximately 12% to 19% year-over-year growth.
AI is back in the spotlight
It’s important to note that Meta’s stock price has increased by double digits over the past year, and AI has been the center of attention in earnings announcements and presentations.
That conversation continued Wednesday night, with Zuckerberg saying it was “part of our long-term vision for the future of AI and computing.” [are] It will bring you into sharper focus. It is estimated that over 3.2 billion people currently use at least one app every day, and we are seeing rapid adoption of Meta AI and Llama, which are quickly becoming the norm across industries. ” He noted that Threads has evolved into a community with 275 million monthly active users and is growing by more than 1 million daily subscribers.
“Our AI efforts are also making significant progress, with AI touching nearly every aspect of our work, from core business initiatives and monetization to new services and long-term roadmaps for computing. We see a positive impact on the platform,” Zuckerberg said. According to him, MetaAI has more than 500 million monthly active users.
AI-driven feed and video recommendation improvements have led to an 8% increase in time spent on Facebook and a 6% increase in time spent on Instagram this year alone, Zuckerberg said, adding that “more than 1 million advertisers created more content using our GenAI tools.” Over 15 million ads were posted last month. It is also estimated that businesses that use image generation see a 7% increase in conversions. …We believe there are even more benefits here.
“The usage of Llama tokens has increased exponentially,” he said. He said the Llama 3 model represents a “tipping point” for the industry, while Llama 4 is “well underway in development.”
The company continued to lose money at its Reality Lab division, home to its virtual reality and augmented reality efforts, with sales of $270 million, up from $210 million a year earlier, but an operating loss a year earlier. It expanded from $3.7 billion to $4.4 billion. .
Zuckerberg said on the conference call that the company’s Ray-Ban glasses are doing well and now feature Meta AI integration to help users make suggestions as they use the product. Zuckerberg calls this the “ideal form factor for AI. It sees what you see, hears what you hear, and has a conversation with you. Demand remains very high.”
CFO Lee said that within advertising revenue, “the online commerce segment contributed the most to year-over-year growth, followed by healthcare, entertainment and media.” … On Instagram, Reels continues to see good traction. And we’re continually evolving our focus on promoting original content, with over 60% of recommendations in the US now coming from original posts. ”
Mr. Li pointed to the use of advanced models to monetize and enhance marketing performance.
“Similar to organic content rankings, we see opportunities to significantly improve ad performance by taking new approaches to modeling. For example, we recently introduced new learning and modeling techniques to We enabled the system to consider the sequence of actions a user takes before and after viewing an ad. Previously, our advertising system could only aggregate these actions without mapping the sequence.” Lee said the company has seen a 2% to 4% increase in conversions based on testing within selected segments.
“For Reality Labs, we continue to expect 2024 operating loss to be significantly higher year-over-year due to our continued product development efforts and investments to further expand our ecosystem,” she said.
Zuckerberg highlighted how AI will be used in everything from daily task management to content creation. “Our goal for the next year is to enable these fairly widespread use cases, although it will be several years before we get the depth of use and business outcomes that we would like.”
More information: AI, AI Infrastructure, Artificial Intelligence, Revenue, Featured News, GenAI, Generative AI, Large-Scale Language Models, LLAMA, LLM, Mark Zuckerberg, Meta, Meta AI, News, PYMNTS News, Reality Labs, Susan Lee
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