Meta expects a sharp acceleration in AI costs after results exceed Wall Street targets

The results sent mixed signals to investors about whether digital ad sales from Meta’s core social media business would continue to cover the costs of its massive AI expansion.

Shares of the Menlo Park, California-based company fell 2.9% in after-hours trading.

“Meta needs to prove it can continue to cover its AI costs as they rise next year, and any weakness in its core advertising business could make investors nervous as they continue to wait for a return on Meta’s bigger AI bets,” the Emarketer executive said . analyst Jasmijn Enberg.

Like its Big Tech peers, Meta has invested heavily in data centers to take advantage of the generative AI boom. However, unlike cloud service providers, it does not expect to make money immediately from those investments and is therefore more subject to investor scrutiny of its spending.

Meta CEO Mark Zuckerberg acknowledged in a conference call with analysts that more infrastructure spending “may not be what investors want to hear in the near term,” but said the company would continue to invest nonetheless.

“I just think the opportunities here are very good,” he said.

The world’s largest social media company kept costs under control in the third quarter, with total expenses of $23.2 billion and capital expenditures of $9.2 billion. It also expected a slightly improved cost picture for the year, lowering its total cost forecast to $96 billion to $98 billion.

However, in its press release, it warned of “a significant acceleration in infrastructure cost growth next year as we recognize higher growth in depreciation and operating costs of our expanded infrastructure fleet.”

The company’s shares are up about 500% this year from their lows and up about 67% year to date.

On Wednesday, analysts also asked Meta about its workforce, which stood at 72,404 employees, compared to 66,185 in the previous year’s quarter.

Chief Financial Officer Susan Li said Meta would focus on “making more efficient” parts of the company, including those departments that continue to add employees.

Meta reported third-quarter earnings of $6.03 per share, compared with estimates of $5.25 per share, according to data compiled by LSEG. Third-quarter revenue was $40.59 billion, compared to analyst estimates of $40.29 billion.

The company also expects revenue of between $45 billion and $48 billion in the fourth quarter, compared to analyst estimates of $46.31 billion, according to LSEG data.

Advertising is responsible for the vast majority of Meta’s revenue, meaning increased marketing spend by retailers and other companies during the holiday season could provide a crucial boost to the bottom line, analysts say.

Meta’s Family Daily Active People (DAP), a metric used to track unique users who open one of its apps in a day, grew 5% in the third quarter to 3.29 billion. DAP rose 7% to 3.27 billion in the previous June quarter.

The company is well positioned to squeeze more revenue from users even if user growth slows, as its AI tools can show people more content that matches their interests, Enberg said.

When considering Reality Labs’ investments for 2025, executives were excited about the progress and strong consumer interest they had seen especially around the smart glasses, Li said.

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Akash reports on US technology companies, electric vehicle companies and the aerospace industry. His reporting usually appears in the Autos & Transport and Technology sections. He has a postgraduate degree in Conflict, Development and Security from the University of Leeds. Akash’s interests include music, football and Formula 1.