Meta Reveals Stock Surge for Facebook Parent Company Amid AI Strategy
Meta achieved a significant increase in profits during the spring, thanks to online advertising, reassuring investors who have become more willing to accept substantial spending on artificial intelligence (AI) as long as core activities remain strong.
The parent company of Facebook, Instagram, and WhatsApp saw its net profit rise by 73% year-over-year to $13.5 billion in the second quarter, with revenues reaching $39 billion (+22%). These figures exceeded both Meta's and market expectations.
Meta's stock rose by more than 7% in after-hours trading following the New York Stock Exchange close on Wednesday.
The market is currently focused on how major tech companies are investing in generative AI, which is often seen as crucial, and the potential for unprecedented returns on investment.
Jasmine Enberg of eMarketer stated, "Meta has gained investor patience by investing in its future vision," adding, "Investors are more easily accepting the large sums spent on AI (...) because advertising activities are strong."
The company, which faced stock penalties in the first quarter due to increased spending, has raised its capital expenditure range to between $37 billion and $40 billion for the year.
Since the success of ChatGPT, the tech giant has been rolling out models and applications capable of generating high-quality content based on simple everyday language prompts.
However, these models require new IT infrastructure, large amounts of energy, skilled engineers, and more.
In April, Meta unveiled the latest version of Meta AI, its assistant that answers user questions similar to ChatGPT. It has gained traction on the company's platforms thanks to LLaMA 3, its latest AI model comparable to ChatGPT 4 (from OpenAI) and Gemini (from Google).
Mark Zuckerberg confirmed during an analyst conference that "Meta AI is on track to become the most used AI assistant by the end of the year.
He noted that the amount of data required to train LLaMA 4 "will definitely be ten times greater than what was used for LLaMA 3.
He highlighted the difficulty of predicting long-term needs, "but given the operational timelines, it is better to take the risk of enhancing capabilities early rather than too late."
Microsoft (the largest investor in OpenAI) and Google lead the field, but the world's second-largest digital advertising company aims to become "the most important AI company in the world.
Debra Williamson of Sonata Insights said, "Unlike Google, which is facing changes that could impact its core business, most of Meta's AI investments improve advertising on its platforms or help create new features that could become revenue sources.
The ability of AI models to answer user questions or even converse with them promises to revolutionize online search.
Meta has begun to leverage AI through content recommendation algorithms and ad targeting algorithms.
Zuckerberg stated, "Our systems are better predicting which users will be interested in ads.
He mentioned that generative AI will soon be able to create ads itself and tailor them to user interests, adding, "In the long term, businesses will provide their commercial objectives, and we will handle the rest for them.
In the second quarter, Meta benefited from ad sales supported by Reels, short videos similar to those on TikTok.
Max Willens of eMarketer said, There was a synergy between increased opportunities for businesses and rising average ad prices.
He continued, "With similar healthy margins, Meta investors should feel comfortable with the company’s investments in its future plans.
Note that Meta's Reality Labs, responsible for developing metaverse-related devices and software, incurred losses of up to $4.5 billion this quarter.
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