Mark Zuckerberg, CEO of Meta Platforms Inc., was interviewed by “The Circuit with Emily Chang” at Meta’s headquarters in Menlo Park, California, USA, on Thursday, July 18, 2024.
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For skeptical investors Yuan Chief Executive Mark Zuckerberg urged them to look at the huge current spending on artificial intelligence and whether it will pay off soon.
After the company reported better-than-expected second-quarter earnings on Wednesday, Zuckerberg and Chief Financial Officer Susan Lee rattled off all the ways artificial intelligence is helping the company grow faster than rivals in Meta’s core business, the digital advertising market. .
“I think there’s a lot of benefit in the way it improves recommendations, helps people find better content and makes the ad experience more effective,” Zuckerberg said on the earnings call. “These are products that are already at scale. We’re working on it Artificial intelligence work will improve this.”
Meta reported revenue rising 22% year over year to $39.07 billion, with 98% of sales coming from advertising, primarily on Facebook and Instagram. Its growth rate is twice that of Google’s advertising business, whose sales grew 11% to $64.6 billion. letter said in last week’s earnings report.
at the same time, interest and SpotifyBoth companies are significantly smaller than Meta, reporting revenue growth of 21% and 20% respectively in their latest reports.
As in previous quarters, Li said Meta’s advertising business has benefited from the online commerce, gaming and media and entertainment sectors, with advertising growth continuing to be strongest in the Asia-Pacific region. She said the company’s “improved ad performance” has helped boost overall ad prices despite slowing growth in the region.
Zuckerberg pointed to artificial intelligence as the foundation behind Meta’s updated online advertising platform, which is apple iOS privacy updates were rolled out in 2021, making it more difficult for social media companies to target users online.
“They’ve used artificial intelligence to rebuild the ad tech stack, changed the user interface, and generated more traffic because of artificial intelligence,” Evercore ISI network analyst Mark Mahaney told CNBC’s “The Closing Bell: Overtime” on Wednesday. “It’s showing up in revenue and profits now,” said Mahaney, who recommends buying Meta stock.
Meta shares rose 7% in after-hours trading after Wednesday’s earnings report, which included an upbeat forecast for the current quarter.
Like other big tech companies, Meta is spending billions NVIDIA Graphics processing unit (GPU), used to train AI models and run large workloads. Some industry experts have questioned the spending, since much of the investment is tied to expectations that generative artificial intelligence (popularized by OpenAI’s ChatGPT) will deliver huge revenue growth in the future.
‘Already seeing a return’
Meta suggests that despite betting on significant growth ahead, the company is reaping rewards today.
“In the last two years, you’ve seen the return of Meta,” Mahaney said.
CFRA Research analyst Angelo Zino agreed with Mahaney, telling CNBC that Meta has “really addressed some of the concerns and storms from a few years ago” and is “clearly integrating artificial intelligence into their ecosystem very well.”
Zino noted that Meta’s growth rate “far exceeds that of its peers.”
Meta isn’t done investing huge sums of money in artificial intelligence and the distant metaverse, it continues Billions of dollars are lost every quarter. Li said Meta expects “capex to grow significantly in 2025 as we invest to support our AI research and product development efforts.”
Meta said it now expects capital expenditures in 2024 to be between $37 billion and $40 billion, raising the lower end of that range ($35 billion).
Li said investors should view Meta’s artificial intelligence strategy as a two-pronged approach, with “core artificial intelligence” helping Meta improve its advertising platform and recommendation system, thereby increasing user engagement and advertising effectiveness, which “translates into revenue gains.” ”.
Generative AI is a long-term bet. Lee said the company “does not expect our Gen AI products to be a meaningful revenue driver in ’24, but we do expect they will open up new revenue opportunities over time, allowing us to generate solid revenue.” Our investment pays off.
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