Meta saw a big jump in profits in the spring, helped by online advertising, reassuring investors who are more willing to accept huge spending on artificial intelligence if the core business holds up.
The net profit of the parent company of Facebook, Instagram and WhatsApp rose 73 percent year-on-year to $13.5 billion in the second quarter, on revenue of $39 billion (+22%) and came in above Meta and market expectations.
Meta shares rose more than 7 percent in electronic trading after the New York Stock Exchange closed on Wednesday.
The market is currently focused on what the big tech companies are spending on generative AI, which is often seen as critical, and the potential for unprecedentedly rapid returns on investment.
Meta has won over investors by investing in its vision for the future, said Jasmine Enberg of eMarketer, adding that they are more accepting of the money spent on AI (...) because advertising is strong.
The group, which was sanctioned on the stock exchange during the first quarter due to increased expenses, has again increased the scope of its capital investments, which now range between $37 and $40 billion for this year.
AI-based assistant
Since the success of ChatGPT, the tech giant has been rolling out models and applications that can produce high-quality content based on a simple request in everyday language.
But these models require new IT infrastructure, large amounts of energy, qualified engineers, and more.
Meta unveiled the new version of Meta AI in April, its assistant that answers users’ questions similar to ChatGPT. It has gained popularity across the group’s platforms thanks to Llama 3, the latest version of its AI model, which is comparable to ChatGPT 4 (from OpenAI) and Gemini (from Google).
Mark Zuckerberg confirmed during a conference call with analysts that Meta AI is on track to become the most widely used AI assistant by the end of the year.
He pointed out that the amount of information resources needed to train Llama 4 would certainly be ten times greater than those used in Llama 3.
He pointed out that it is difficult to predict exact needs in the long term, but given the operational time frames, it is better to risk enhancing capabilities early rather than too late.
Microsoft (OpenAI's first investor) and Google are at the forefront, but the world's second-largest digital advertising company wants to become the world's leading AI company.
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Unlike Google, which is facing changes that could impact its core business, most of Meta’s AI investments are improving advertising on its platforms, or helping to create new features that could become revenue streams, said Debra Williamson of Sonata Insights.
The ability for models to answer users' questions or even talk to them promises to revolutionize online search.
Meta, for its part, has begun to leverage artificial intelligence, through content recommendation algorithms and ad targeting algorithms.
“Our systems are now better at predicting which users will be interested in ads than advertisers,” Zuckerberg said.
He stated that generative artificial intelligence will soon be able to create ads on its own and make them personalized according to the user’s interest, adding that in the long run, companies will benefit from us with their commercial goals and we will take care of the rest for them.
In the second quarter, Meta benefited from ad sales supported by Reels, short-form videos similar to those posted on TikTok.
“There was a correlation between increased opportunities for businesses and higher average ad prices,” said Max Wellens of eMarketer.
With similarly healthy margins, Meta investors should feel comfortable with the company's investments in its future plans.
Reality Labs, a subsidiary of Meta and responsible for creating hardware and software for the Metaverse (a blend of the real and virtual worlds through high-tech glasses and helmets), incurred losses of $4.5 billion during this quarter.
