The old saying goes: you have to spend money to make money.
For Meta, notch a third quarter earnings report with record sales, the fact remains that the long term roadmap for artificial intelligence (AI) will require not yet defined billions of dollars in capital investments in the coming year and beyond.
The read on It could be that margins felt a pinch, and investors sent the stock 3% lower after closing time trading on Wednesday (October 30).
The record came in the shape of approximately $40.6 billion in salesan increase of 19% compared to a year ago.
As for the core activities: profit supplements noticed that total advertising-related Revenue came to $39.9 billion, compared to $33.6 billion last year. Ad impressions drove 7% growth year after yearwhere a year ago those growth rates were no less than 21% worldwide. The average price per advertisement was 11%, slightly higher than the 10% in the second quarter. The company reported daily active users of approximately 3.29 billion, up 5%.
CEO Mark Zuckerberg said the conference I call analysts that the advancement of AI will be tied to “serious infrastructure.” That infrastructure will require the company to “continue to make significant investments” against a backdrop of executive action Also said the company had not yet decided on a “final budget”.
2025 is shaping up to be a year where Zuckerberg and CFO Susan Li said on the call that capital expenditures in 2024 will be around $38 billion to $40 billion, narrowing the bottom end of the range. The forward guidance of $45 billion to $48 billion for fourth-quarter revenue implies growth of roughly 12% to 19% versus prior years. years ago period.
AI back in the spotlight
It should be noted that Meta’s stock is up double digits over the past year, and that AI has focused on earnings calls and presentations.
That story continued Wednesday night: Zuckerberg said that “parts of our long term vision on AI and the future of computing [are] come into sharper focus. We estimate that more than 3.2 billion people now use at least one of our apps every day, and we are seeing rapid adoption of Meta AI and Llama, which are quickly becoming a standard across the industry.” He noticed that Threads has grown into a community with 275 million active users per month, and is growing by more than 1 million registrations every day.
“We are also making great progress with our AI efforts and we see AI having a positive impact on almost all aspects of our work – from our core business and revenue generation to our long term roadmaps for new services and computing platforms,” Zuckerberg said. Meta AI has more than 500 million monthly active users, he said.
Improvements to AI-powered feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone, said Zuckerberg, who added: “more than a million advertisers used our GenAI tools to more than 15 millions advertisements from the past month. And we estimate that companies that use image generation see a 7% increase in conversions. …We believe that there is here is much more benefit.
“The use of llama tokens has grown exponentially,” he said. The Llama 3 models, he said, represent a “turning point” in the industry, but Llama 4 is “well in development.”
The company continues to lose money on its Reality Labs segment – home to virtual reality and augmented reality efforts – where revenues of $270 million were up from $210 million a year ago, but operating losses rose to $4.4 billion, compared to $3.7 billion last year.
Zuckerberg said on the call that its Ray-Ban glasses are doing well and now have a Meta AI integration that helps users with suggestions as they use the product — which he called “the ideal form factor for AI because you can let your AI sees what you see, hears what you hear and talks to you. The demand for the glasses remains very high.”
CFO Li said that within advertising revenues, “online commerce was the largest contributor to year-on-year growth, followed by healthcare, entertainment and media. … On Instagram, Reels continues to see good traction. And we’re making continued progress with our focus on promoting original content, with more than 60% of recommendations now coming from original posts in the US.”
Li pointed to the use of advanced models to generate revenue and improve marketing performance.
“Just like with ranking organic content, we find opportunities to drive meaningful results advertisements performance gains from adopting new ones approaches to modeling. For example, we recently implemented new learning and modeling techniques that allow our advertising systems to take into account the sequence of actions someone takes before and after seeing an ad. Previously, our advertising system could only aggregate these actions, without mapping the order.” The company has seen a 2% to 4% increase in conversions based on testing within select segments, Li said.
“For Reality Labs, we continue to expect operating losses to increase significantly year over year through 2024 as a result of our continued product development efforts and investments to further scale up our ecosystemshe said.
Zuckerberg emphasized the ways in which AI will be deployed in the service of everything from daily task management to content creation. “In Over the next year our goal will be to try to make these fairly widespread use cases, even though there will be a multi-year path to achieving the depth of use and business outcomes that we want.
