Photo credit: Meta
Mark Zuckerberg, the CEO of Meta, the parent company of Facebook, Instagram, and WhatsApp, is set to ramp up significant investments in artificial intelligence (AI) and other futuristic technologies.
This move continues a longstanding conflict between the company's long-term bets and its core advertising business, which provides the majority of Meta's revenue.
Zuckerberg cautioned investors on Wednesday that Meta will continue to invest heavily in infrastructure and projects like the metaverse and AI-powered glasses, which he sees as vital to the company’s future.
This strategy will be supported by the ads business, which has not been meeting Wall Street's expectations for momentum. As a result, Meta shares dropped more than 2.8% in extended trading.
“We’re seeing AI have a positive impact on nearly all aspects of our work, from our core businesses to new services and computing platforms,” Zuckerberg said during the third-quarter earnings call. “There are lots of opportunities to use new AI advances to accelerate our core business.”
Meta indicated that losses from Reality Labs, its division focused on AI and augmented reality, will continue to widen significantly this year, with the 2025 budget still being finalized. Reality Labs reported a $4.4 billion operating loss for the quarter.
With costs projected to reach nearly $100 billion this year, Meta is putting pressure on its core advertising business to fund these efforts. Meta informed investors that revenue for the current quarter would be between $45 billion and $48 billion, compared to analysts' expectations of $46 billion.
In recent years, Zuckerberg has re-framed Meta as an AI innovator, shifting investor perception of the company’s potential for growth. Meta has developed several key AI products as part of this pivot, including large language models for chatbots, an AI assistant integrated into its social apps, and AI-powered smart glasses.
Meta is already working on Llama 4, the next version of its large language model, which Zuckerberg claims will be faster, more powerful, and more cost-effective than previous models.
Some of Zuckerberg’s most ambitious projects remain years away from mainstream adoption. He envisions a future where users work and play inside a digital universe known as the metaverse, which Meta is still developing.
The company recently unveiled its first pair of augmented reality glasses, named Orion, which can project images onto the physical world. Zuckerberg hopes these glasses may one day rival smartphones.
The focus on AI has helped boost Meta’s stock price, which has risen more than 67% this year, making it one of the best-performing stocks in the S&P 500. However, this growth has come at a steep cost. “Our AI investments continue to require serious infrastructure and I expect to continue investing significantly there,” Zuckerberg said.
Meanwhile, Meta’s social networks, including Facebook and Instagram, remain the primary drivers of the business. Meta reported sales of $40.6 billion for the quarter ending September 30, a 19% increase over the previous year and slightly above the $40.3 billion average estimate from Wall Street analysts.
Meta has leveraged AI advancements to enhance its ad targeting and content recommendations, resulting in immediate business improvements. The company has adjusted its algorithms to show users more content from outside their network of friends and family, aiming to increase engagement and keep users scrolling. It has also reduced the spread of political content.
AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram, according to Zuckerberg. These recommendations are largely powered by AI, enabling the company to more accurately predict what users want to see.
Meta announced that its expenses for the year would be between $96 billion and $98 billion, lowering the top end of that range by $1 billion.