A sign at Meta's headquarters in Menlo Park, Calif., on Nov. 9, 2022.Godofredo A. Vásquez/The Associated Press
Facebook-owner Meta Platforms Inc. META-Q beat analysts’ estimates for third-quarter revenue and profit on Wednesday, but warned of “significant acceleration” in artificial intelligence-related infrastructure expenses.
The results sent mixed signals to investors about whether digital ad sales from Meta’s core social media business would continue to cover the cost of its massive AI buildout.
Shares of the Menlo Park, California-based firm were down 2.2 per cent in after-hours trading.
“Meta is firing on all cylinders and AI is clearly driving growth,” said Jesse Cohen, an analyst at Investing.com. “With that being said, investors appear to be disappointed over the company’s forward guidance and rising costs needed to develop AI features.”
Like its Big Tech peers, Meta has invested heavily in data centres to capitalize on the generative AI boom. Unlike providers of cloud services, however, it does not expect to earn money from those investments right away and therefore is more subject to scrutiny from investors around its spending.
The world’s biggest social media company kept costs in check in the third quarter, with total expenses of US$23.2-billion and capital expenditure of US$9.2-billion. It projected a slightly improved expense picture for the year as well, narrowing its total expense forecast to US$96-billion to US$98-billion.
In its press release, however, it warned of “a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet.” Meta’s earnings come after encouraging results from digital ad bellwethers Alphabet Inc. and Snap Inc., which both beat third-quarter revenue estimates on Tuesday thanks in part to rising sales of AI-assisted ads.
Meta reported third-quarter profit of US$6.03 per share, compared with estimates of US$5.25 per share, according to data compiled by LSEG. Third-quarter revenue stood at US$40.59-billion, compared with analysts’ estimates of US$40.29-billion.
The company also forecast between US$45-billion and US$48-billion in fourth-quarter revenue, compared with analysts’ estimates of US$46.31-billion, according to data from LSEG.
Advertising accounts for the vast majority of Meta’s revenue, meaning higher marketing spending during the holiday season could provide a crucial boost to the company’s bottom line, according to analysts.
Meta’s family daily active people (DAP), a metric it uses to track unique users who open any one of its apps in a day, grew 5 per cent in the third quarter to 3.29 billion. DAP increased 7 per cent in the preceding June quarter, to 3.27 billion.
The company’s Reality Labs division, which produces its Quest virtual reality headsets, smart glasses made with EssilorLuxottica SA’s Ray-Ban and upcoming augmented-reality glasses, lost US$4.4-billion in the third quarter, narrower than analyst estimates of a US$4.7-billion loss.