Meta Platforms Inc. is set to significantly increase investments in artificial intelligence and other innovative technologies, as CEO Mark Zuckerberg navigates the ongoing challenge of balancing these long-term initiatives with the advertising business that constitutes the bulk of the company’s revenue.
During a call with investors on Wednesday, Zuckerberg underscored his commitment to substantial spending on infrastructure projects, including developments in the metaverse and AI-driven glasses. He views these ventures as critical to Meta’s future growth. The advertising segment, however, has not provided the momentum that Wall Street anticipated, leading to a more than 2.8% decline in shares during after-hours trading.
Zuckerberg remarked, “AI is positively affecting nearly every aspect of our operations, from our main business lines to new services and computing platforms. There are abundant opportunities to leverage AI advancements to speed up our core operations.”
Despite this optimism, Meta has warned of significant losses from its Reality Labs division, which focuses on artificial intelligence and augmented reality. These losses are expected to expand “meaningfully” this year, with Reality Labs reporting an operating loss of $4.4 billion in the most recent quarter. The budget for 2025 is still under development.
With projected costs nearing $100 billion this year, Meta’s reliance on its advertising business to sustain these efforts is evident. The company informed investors that it anticipates revenue for the upcoming quarter to fall between $45 billion and $48 billion, slightly below analysts’ average estimates of $46 billion for the fourth quarter.
In recent years, Zuckerberg has aimed to rebrand the social media giant as a leader in AI innovation, reshaping investor perceptions regarding Meta’s growth potential. The company has introduced several key AI products, such as large language models for chatbots, an assistant integrated into its social platforms, and AI-enhanced smart glasses. Currently, Meta is working on the next iteration of the Llama model, with Llama 4 expected to be faster, more powerful, and cost-efficient compared to its predecessors.
Nonetheless, some of Zuckerberg’s more ambitious plans remain a few years away from widespread adoption. He envisions a future where users can engage in work and leisure activities within a digital realm known as the metaverse, which is still under development by Meta. Recently, the company also launched its first pair of augmented reality glasses, called Orion, designed to project images onto the real world, with aspirations for these glasses to eventually rival smartphones.
The company’s focus on AI has positively impacted its stock performance, which was up over 67% year-to-date as of Wednesday’s market close, positioning it among the top performers in the S&P 500. However, this focus comes with substantial costs. Zuckerberg stated, “Our AI investments demand significant infrastructure, and I plan to continue making substantial investments in this area.”
In the meantime, Meta’s social media platforms, including Facebook and Instagram, continue to generate the majority of the company’s revenue. For the third quarter ending September 30, Meta reported sales of $40.6 billion, marking a 19% increase compared to the same period last year and just surpassing the $40.3 billion average forecast from Wall Street analysts.
Enhancements in AI technology have bolstered Meta’s ad targeting and content recommendation capabilities, resulting in more immediate business benefits. The company has adjusted its algorithms to showcase a wider range of content beyond users’ social circles, aiming to boost engagement. Additionally, it has been taking steps to limit the visibility of political content.
Zuckerberg highlighted that AI-influenced recommendations for feeds and videos have contributed to an 8% rise in time spent on Facebook and a 6% increase on Instagram. These improvements are largely attributed to AI advancements, allowing the company to better predict user preferences.
Meta has revised its expense projections for the year to a range of $96 billion to $98 billion, reducing the upper limit by $1 billion.
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