Meta, the world’s number two in online advertising, recorded 40.59 billion dollars (35.16 billion Swiss francs) in turnover, up 19% year-on-year, of which it earned 15.69 billion in profits (13.59 billion Swiss francs, +35%), or more than two billion than analysts expected.
Boss Mark Zuckerberg praised during a call with analysts a “good quarter” which saw “the long-term vision on AI” become the center of attention. Meta already widely uses technology to recommend content and target advertising to its billions of users – 3.29 billion in September – and “this is one of the reasons for the increase in its turnover », underlines Debra Williamson, of Sonata Insights.
Read also: Meta sees its profits soar in the spring, a good omen for future spending in AI
According to Mark Zuckerberg, more than a million advertisers used its AI-powered content generation tools last month. And recommendation algorithms have allowed the time spent on its applications to increase (+8% on Facebook and +6% on Instagram this year). “Meta’s solid revenue growth this quarter will help ward off concerns about its investments in AI,” observes Debra Williamson. But the stock lost 2.60% around 10:30 p.m. GMT (11:30 p.m. in Switzerland) during electronic trading after Wall Street closed.
Continued investments in AI
The deployment of tools based on the ChatGPT model, making it possible to produce content on a simple request in everyday language, has forced the tech giants to take action, the technology requiring expensive IT infrastructures, a lot of energy and an army of highly qualified engineers. Meta once again revised its capital investment forecasts upwards on Wednesday: for 2024 alone, it forecasts a range of 38 to 40 billion dollars (compared to 37-40 billion previously).
Also read: Artificial intelligence attracts titanic investments to create data centers
The pace will not slow down in 2025. Mark Zuckerberg stressed the need to invest “more” in AI applications for his business (ads and engagement on social networks), with “strong returns on investments expected in the coming years.”
To try to take the lead in the race for AI-powered companions/assistants, Meta is banking on conversations with users of its applications thanks to the new version presented in April of Meta AI, its assistant which answers users’ questions , like ChatGPT. Meta AI has gained visibility on the group’s platforms and skills thanks to Llama 3, the latest version of Meta’s AI model, comparable to GPT-4 (OpenAI) and Gemini (Google).
- The “cloud” drives Microsoft’s results
Meta’s competitors who are leading the way in AI, Alphabet (Google) and Microsoft, also exceeded expectations with their quarterly results. Net profit for Microsoft’s first financial quarter (July to September) stood at $24.7 billion (21.40 billion Swiss francs), up 11% year-on-year, according to a press release. Reported per share, the indicator most scrutinized by Wall Street, it comes to $3.30, better than the $3.10 projected by analysts, according to a consensus established by FactSet.
As in previous quarters, the Redmond (Washington State) group was driven by the “cloud”, that is to say the remote computing services that Microsoft offers to customers, especially businesses, which outsource the storage and management of their IT data. Cloud revenue increased by 22% year-on-year, faster than in the previous quarter (+21%).
The Azure platform, used by “cloud” customers, recorded even greater growth (+33%), a rate also higher than that of the period from April to June.
Read: With 22 billion in quarterly profits, Microsoft outperforms but the performance of its AI services disappoints
In total, turnover increased by 16% to $65.6 billion (56.83 billion Swiss francs). Matt Britzman, analyst at Hargreaves Lansdown, noted the 12% increase, above expectations, in the Productivity and Professional Tools division, whose services integrate artificial intelligence into their offering. This “supports the thesis that large cloud operators are well positioned to benefit from the demand for AI,” according to the analyst.
Steep rise in costs
Over the quarter, the group gained, in net, two million customers to its portfolio of subscribers to its Microsoft 365 software suite, which now totals 84.4 million users.
Read more: “There are a lot of frustrations with Microsoft’s generative AI assistant”
The company has centralized the capabilities of so-called generative AI in the virtual assistant Copilot, which allows Microsoft 365 users subscribed to this service to complete certain tasks more quickly.
The fact that profit is growing less quickly than turnover is due to the frantic rate of increase in costs (+23%).
Microsoft justified it by the effect of the absorption of the video game publisher Activision, finalized a year ago, as well as by investments in the “cloud”. In this quarter alone, the IT giant spent $20 billion on “cloud” and AI. Microsoft’s gross margin in the two divisions including “cloud” decreased slightly due to the deployment of new AI capabilities, the company said.
Financial Director Amy Hood indicated during the earnings conference call that investments would further accelerate during the current quarter and that margins would be lower than the same period last year. The announcement tensed up the market, especially as the manager revealed less sustained growth forecasts than during the previous quarter in the Productivity and professional tools division.
