Meta warns of increasing AI losses after narrowly beating sales
Meta Platforms Inc. CEO Mark Zuckerberg will ramp up heavy investments in AI and other futuristic technologies, continuing a yearslong tug-of-war between the company’s long-term bets and the core advertising business that generates the vast majority of Meta’s revenue.
Zuckerberg warned investors Wednesday that Meta will continue to spend significantly on infrastructure and other projects such as the Metaverse and AI-powered glasses, efforts he said are core to the company’s future. That will be supported by the advertising sector, which is not generating the kind of momentum Wall Street expected. Shares fell more than 2.8% in extended trading.
“We see AI having a positive impact on almost all aspects of our work, from our core businesses to new services and computing platforms,” Meta’s CEO said during the third quarter earnings call. “There are many opportunities to use new AI developments to accelerate our core activities.”
Meta warned that losses at Reality Labs, the division focused on artificial intelligence and augmented reality, will continue to increase “meaningfully” this year, adding that the 2025 budget is still being finalized. Reality Labs reported an operating loss of $4.4 billion in the quarter.
With costs expected to reach nearly $100 billion this year, Meta is putting pressure on its core advertising businesses to fund the effort. Meta told investors Wednesday that revenue for the current quarter would be between $45 billion and $48 billion. Analysts had expected fourth-quarter revenue of $46 billion.
Zuckerberg has worked in recent years to redefine the social media company as an AI innovator, changing investors’ perceptions of Meta’s potential growth. As part of that pivot, Meta has developed several key AI products, including large language models used to power chatbots, an assistant built into its various social apps, and AI-powered smart glasses. Meta is already working on the next version of Llama, the major language model that powers its AI products and services, and Zuckerberg said Llama 4 will be faster, more powerful and more cost-effective than previous models.
However, some of Zuckerberg’s most ambitious projects are still years away from mainstream consumption. Ultimately, Zuckerberg hopes users will work and play in a digital universe known as the metaverse, which Meta is still building out. The company also recently unveiled its first augmented reality glasses, which can project images onto the physical world. Zuckerberg hopes that these glasses, called Orion, can one day rival the smartphone.
That focus on AI has fueled Meta’s stock price, which was up more than 67% this year as of market close Wednesday, making it one of the best-performing stocks in the S&P 500. But there are also high costs involved. “Our AI investments continue to require serious infrastructure and I expect to continue to invest significantly there,” Zuckerberg said.
Meanwhile, Meta’s social networks, including Facebook and Instagram, continue to power most of the business. Meta reported revenue of $40.6 billion for the period ended September 30, a jump of 19% from the year-ago quarter, and just above the average estimate of $40.3 billion from Wall Street analysts.
Meta has leveraged AI enhancements to improve ad targeting and content recommendations, which have had a more direct impact on the bottom line. The company has tweaked its algorithms to show people more content from outside their network of friends and family, as part of a broader strategy to increase engagement and keep people scrolling. It has also reduced the circulation of political content.
AI-powered feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram, Zuckerberg said Wednesday. These recommendations are largely powered by AI improvements, which allow the company to more accurately predict what people want to see.
Meta said spending for the year will be between $96 billion and $98 billion, reducing the top end of that range by $1 billion.
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