Meta Declines On Heavy AI Spending Plans, Despite Strong Q1

Meta Platforms has worried Wall Street after revealing heavy AI spending plans that wiped approximately $190 billion from its market value.

On Wednesday evening during an earnings call, Meta co founder and CEO Mark Zuckerberg said that spending on artificial intelligence (AI) would have to grow “meaningfully” before the company could make “much revenue” from new AI products.

Investors didn’t like that, and when the market’s opened on Thursday Meta’s share price slumped 15 percent (it is down 12.6 percent at $431.31 at the time of writing). This was despite Meta posting another stunning set of financial results.

First quarter financials

For the first quarter ending 31 March 2024, Meta posted a net profit up 117 percent at $12.4 billion, from $5.7bn in the same year-ago quarter.

Revenues rose 27 percent $36.5bn from $28.6bn a year earlier. Meta generates 98 percent of its revenue from digital advertising.

“It’s been a good start to the year,” said Mark Zuckerberg. “The new version of Meta AI with Llama 3 is another step towards building the world’s leading AI. We’re seeing healthy growth across our apps and we continue making steady progress building the metaverse as well.”

Indeed, it continues a remarkable transformation in Meta’s financial performance after a brutal 2022, during which the company lost about two-thirds of its value.

Zuckerberg began 2023 with a ‘year of efficiency’ pledge after he had displeased Wall Street with the scale of heavy spending on the Metaverse.

During 2023 Meta repeatedly slashed its workforce numbers (approximately 21,000 staff) as well as other operating expenses. This aggressive cost cutting saw Meta’s stock price almost triple in value last year, and propelled Meta’s market cap well past $1 trillion.

Meta’s workforce now stands at 69,329 as of 31 March 2024, a decrease of 10 percent year-over-year.

Meta no longer reports key metrics such as its daily active users and monthly active users.

Instead it now provides a figure for what it calls “family daily active people” or DAP. That number was 3.24 billion for March 2024, a 7 percent increase from a year earlier.

AI spending

In its financial results, Meta made clear it will be spending heavily on AI.

“We anticipate our full-year 2024 capital expenditures will be in the range of $35-40 billion, increased from our prior range of $30-37 billion as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” the firm stated.

“While we are not providing guidance for years beyond 2024, we expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts,” it added.

Meta’s Zuckerberg had been criticised in January over for saying he intends for the company to build artificial general intelligence (AI) systems and make them “widely available” to the public.

“Our long-term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit,” Zuckerberg had said in a post on Instagram.

An industry observer, David Thiel, a data architect and chief scientist of the Stanford Internet Observatory, had called Meta’s AI plans “vaporous”, while a member of the UN’s AI body had said the idea of making such powerful tools widely available was “irresponsible”.

But on Wednesday Zuckerberg in a conference call added to investor concern about Meta’s AI spending, after he said investments in artificial intelligence were increasing.

“On the upside, once our new AI services reach scale, we have a strong track record of monetizing them effectively,” Zuckerberg was quoted by CNBC as saying.

Zuckerberg then discussed the Metaverse, touting his company’s headsets, glasses and operating system, which are not making money yet.