Meta Unveils Billion-Dollar AI Investment Plans

Meta has reported record profits for the first quarter of 2024 and announced an increase in investments in artificial intelligence.

In the first three months of 2024, the revenue of the company, which owns Facebook, Instagram, WhatsApp, and Messenger, amounted to $36.5 billion. This is a 27% increase from $28.6 billion a year earlier, slightly exceeding analysts’ estimate of $36.1 billion.

Meta’s profit reached $12.4 billion, more than doubling the previous year’s figure of $5.7 billion.

However, the planned substantial investments in artificial intelligence are exerting financial pressure on the social media giant. Meta has raised its forecast for annual AI development expenses to $35-40 billion from the previous estimate of $30-37 billion due to investments in infrastructure, chip design, and R&D.

The company also forecasts that second-quarter revenues will be $36.5-39 billion, which is below analysts’ expectations. The combination of high AI expenses and moderate revenue forecasts has concerned investors, resulting in Meta’s shares falling by 16% after trading closed on April 24.

According to Thomas Monteiro, a senior analyst at Investing.com, the case of Meta should serve as a warning to companies yet to report to investors. Despite good results for the past quarter, the lowered revenue expectations are more significant, he believes.

“Investors are currently looking at the near future with great skepticism,” added Monteiro.

Since the release of ChatGPT in 2022, the tech giant has shifted focus to integrating AI-based products into nearly all its services—from search in Instagram and Facebook to image creation and smart glasses. Recently, the company introduced new versions of AI-based assistants for its applications.

Meta’s CEO Mark Zuckerberg has invested in AI development for years, which has already enhanced the social networks’ advertising systems. He has also spent billions of dollars on purchasing graphics processors.

Reality Labs Remains in the Red

The Reality Labs division, responsible for the metaverse and hardware, lost approximately $3.8 billion in the first quarter, generating $440 million in revenue. It spends significant resources on creating virtual and augmented reality headsets, as well as the Horizon OS.

In a conversation with investors, Zuckerberg noted the “early success” of AI-featured Ray-Ban smart glasses. According to him, certain models were completely sold out in some markets.

Recently, the glasses received new AI-based features. They now function as an audio assistant capable of answering user questions or translating text into different languages.

In recent years, Meta has experienced a series of successes and setbacks, reflecting on its business dynamics. However, revenues are now rising thanks to the recovery of the advertising market and user engagement in the company’s applications.

Zuckerberg urged investors to be patient, citing the previous experience of now-popular services like Stories and Reels on Instagram. According to him, Meta is primarily focusing on scaling, leaving monetization for later.

“If they scale well, they will eventually become very large businesses,” said Zuckerberg.

In April, Meta announced the implementation of a next-generation AI chip.