Meta’s Lesson in Allaying Wall Street’s A.I. Fears

Mark Zuckerberg, the C.E.O. of Meta, has defended the company’s big spend on artificial intelligence.Credit…David Zalubowski/Associated Press

Meta’s earnings calm A.I. jitters

Another tech giant has run the gantlet of investor worries about the costs of commercializing artificial intelligence — except that this one passed with flying colors.

Shares in Meta are up more than 5 percent in premarket trading, even after the parent of Facebook and Instagram said it had increased spending on A.I. and other projects by 33 percent from a year ago. That suggests that while shareholders remain worried about whether such mammoth investments will pay off, they’re willing to be patient if a company’s core business holds up.

The numbers: Meta’s second-quarter profit was up 73 percent year-on-year, to $13.5 billion, while revenue jumped 22 percent, to $39.1 billion. Its advertising business continued to be a juggernaut, with the company forecasting that sales in the current quarter would come in above Wall Street expectations.

The figure in focus was capital expenditures, with Meta spending $8.5 billion in the second quarter. (That also includes the company’s long-running, unprofitable investments in the so-called metaverse and other endeavors.)

Mark Zuckerberg made no apologies about the big spend. “I’d rather build capacity before it is needed rather than too late,” he told analysts on Wednesday. Underscoring the point, Meta executives said they expected capital expenditures to reach at least $37 billion this year, up from $35 billion (but no more than $40 billion).

That’s in line with what Microsoft and Alphabet said about their A.I. spending. But exceeding expectations in core operations helps, as opposed to falling short (however slightly). So too does Meta’s point emphasizing that A.I. innovations would bolster its ad business, by showing users more relevant content.