Meta beats expectations, sending share price soaring

Meta's AI investments totalled US$17 billion, but its Reality Labs unit posted significant losses. Photo / Getty Images

Meta has reported robust second-quarter financial results, with revenue jumping 22% year-over-year to US$47.5 billion ($58.3b) as the social media giant continues investing heavily in artificial intelligence.

The Facebook and Instagram owner’s share price soared as much as 10% in after-hours trading, with investors buoyed by the company’s growing advertising business and a rise in users across its family of platforms.

“We’ve had a strong quarter both in terms of our business and community,” said CEO Mark Zuckerberg. “I’m excited to build personal superintelligence for everyone in the world.”

Meta posted a net profit of US$18.3b, compared with US$13.5b in the same period last year. The results exceeded Wall Street expectations as advertising revenue climbed a stellar 21% to US$46.6b.

Meta’s Family of Apps segment, which includes Facebook, Instagram, WhatsApp and Messenger, saw daily active users reach 3.48 billion in June, up 6% from a year earlier.

The company significantly increased its capital expenditures to US$17b in the quarter, primarily for artificial intelligence (AI) infrastructure investments. Meta projects total 2025 capital spending between US$66b and US$72b.

Zuckerberg has embarked on a major AI spending spree, poaching top researchers with expensive pay packages from rivals like OpenAI and Apple as he builds a team to pursue what he calls AI superintelligence.

The big question is whether Wall Street will continue backing the expensive strategy.

Meta is locked in a bitter rivalry with other tech behemoths as they invest heavily in AI, aiming to ensure the technology benefits society and generates profits in the not-so-distant future.

Most analysts believe Meta will make the investment pay off by improving its advertising efficiency and creating new opportunities, such as with its smart glasses through a partnership with Ray-Ban maker EssilorLuxottica.

“Capital expenditures are still shockingly high, but with these strong results, Meta has bought itself more time with investors,” said Debra Aho Williamson, chief analyst at Sonata Insights.

However, others signal that Meta’s AI spending spree needs a clearer sense of direction.

A strong quarter “won’t shield Meta from questions concerning the company’s future as it breathlessly tries to keep up in the AI race”, Emarketer analyst Minda Smiley said.

“Investors and other stakeholders will press for more details on Meta’s ‘superintelligence’ ambitions – namely, what exactly they entail and how they align with the company’s broader business roadmap,” Smiley added.

Another reason that Zuckerberg’s spending bonanza may raise eyebrows is because it mirrors his previous leap into spending vast amounts on virtual reality and entering the metaverse, with the CEO even changing the company’s name from Facebook to Meta to reflect the strategy change.

The bleeding continued in the company’s metaverse segment, with the Reality Labs division, Meta’s virtual and augmented reality unit, posting significant losses.

The unit lost US$4.5b in the quarter on revenue of just US$370 million, highlighting ongoing challenges in the metaverse business.

‘Undeniable’

Zuckerberg’s AI team is headed by Alexandr Wang, the former CEO of Scale AI, a start-up in which Meta invested US$14.3b at the beginning of the company’s spending blitz in June.

Hours before the earnings report, Zuckerberg insisted that the development of superintelligence is now “in sight”.

In a lengthy post outlining Meta’s AI strategy, Zuckerberg described improvements as “slow for now, but undeniable”, signalling that the remainder of the decade would be a transformative period for artificial intelligence development.

– Agence France-Presse