(Bloomberg) -- Meta Plaforms Inc. reported better-than-expected sales for the second quarter, offering evidence that the company’s investments in artificial intelligence are helping it sell more targeted and personalized advertisements.
Meta shares jumped about 5% in late trading.
The Facebook and Instagram parent company reported sales of US$39.1 billion for the quarter ended June 30, compared with analysts’ estimates of $38.34 billion, according to data compiled by Bloomberg.
The company says it has been using AI to improve the way advertisements find interested users, adding efficiency to its most lucrative business. Meta expects sales for the current quarter of $38.5 billion to $41 billion, compared with the average projection for $39.2 billion.
Meta has meanwhile been spending heavily on data centers and computing power, as Chief Executive Officer Mark Zuckerberg works to build a leading position in the industry-wide AI race. Meta tweaked its full-year projections for capital expenditures, setting a new forecast of $37 billion to $40 billion, raising the low end of an earlier range by $2 billion.
Meta shares, which closed at $474.83 in New York, rose in extended trading following the results. The stock has risen 34% so far this year.
The company is investing in large language models, the technology that underpins AI chatbots. Meta recently unveiled its largest model to date, which Zuckerberg said cost hundreds of millions of dollars in computing power to train. Investors have been looking for signs of a positive impact on the business from all the spending, especially after Meta poured billions into another Zuckerberg passion project — a series of virtual worlds known as the metaverse — without generating much return.
Balancing investment with the more immediate need for financial returns has been a challenge for Meta. Zuckerberg’s moves that have helped support the stock’s performance — job cuts, a $50 billion share buyback program, and Meta’s first-ever quarterly dividend — come as he has remained clear that the company’s spending will keep going up. The company said in a release Wednesday that it plans to increase capital expenditures “significantly.”
“While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” Meta said.
There are some early signs of payoff. Zuckerberg said that Meta’s chatbot, Meta AI, is on pace to become the most widely used AI assistant in the world by the end of the year. Still, Zuckerberg has preached patience with investors, and said in April that “smart investors” would see the long-term promises of this technology, even if the financial returns are years away.
“I think that there’s a meaningful chance that a lot of the companies are over-building now, and that you’ll look back and you’re like, ‘oh, we maybe all spent some number of billions of dollars more than we had to,’” Zuckerberg told Bloomberg earlier this month. “On the flip side, I actually think all the companies that are investing are making a rational decision, because the downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years.”
Meta had 3.27 billion users across all of its apps as of June 30, an increase of 7% from the prior year.
©2024 Bloomberg L.P.