San FranciscoUS group Meta reported second-quarter profits of $13.5 billion on Wednesday, exceeding market expectations and driving up its share price.
Meta, the parent company of social media companies Facebook, Instagram and WhatsApp, said revenue for the quarter was $39 billion, up 22 percent from the same period a year earlier. Analysts had expected revenue of $38.3 billion, according to LSEG data.
“We had a strong quarter, and Meta AI is on track to become the most widely used AI assistant in the world by the end of the year,” said Meta founder and CEO Mark Zuckerberg.
Meta shares rose more than 4 percent to $495.30 in after-hours trading after the earnings figures were released.
The gain came despite Meta’s Reality Labs unit, which makes virtual and augmented reality products, losing $4.5 billion, more than analysts had expected.
Meta’s overall costs reached $24.22 billion, up 7 percent from the same period a year earlier, as it competes with rivals Microsoft, Google and other tech companies to be the leader in the AI field.
Meta also reported that an average of 3.27 billion people used at least one of the Silicon Valley giant’s apps, which include WhatsApp, Instagram and Facebook.
According to the California group, ad views in the quarter rose 10 percent compared to the same period last year, and the average price of ads increased by a similar percentage.
Introduced AI tools for free on its social networks
Meta has been updating its ad buying products with AI tools and short video formats to foster revenue growth, while introducing new AI features, such as chat assistants, to boost engagement on its social networks.
Unlike its competitors, Meta has largely released its AI models for free, betting that this approach will pay off in the form of innovative products, less dependence on potential competitors and increased engagement on its main social networks.
The company would also benefit if developers used its free models instead of paid ones, undermining rivals’ business models. Microsoft-backed OpenAI is often regarded by developers as an industry leader, but Meta last week revealed significant performance improvements with its Llama 3 release that could make its models more attractive.
Like Microsoft and Google, Meta has been pouring billions of dollars into its data centers in an effort to take advantage of the generative AI boom. Its shares plunged in April after it revealed a higher-than-expected spending forecast, quickly wiping $200 billion off its stock value.
Forecasts encouraging revenues in the third quarter
Meta issued an upbeat third-quarter sales forecast of $38.5 billion to $41 billion, saying strong digital advertising spending on its social media platforms can cover the cost of its investments in artificial intelligence. Its average forecast is higher than that of analysts, who anticipate $39.1 billion for the third quarter.
Meta’s gains come after disappointing results from other tech powerhouses, suggesting the benefits of massive investments in artificial intelligence technology may take longer to show on Wall Street than expected.
Microsoft said on Tuesday it would spend more money this fiscal year to build AI infrastructure, while Google parent Alphabet warned last week that its capital spending would remain elevated for the rest of the year.
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– 2024-08-01 07:41:29
