NEW YORK: Meta Platforms Inc gave a disappointing revenue forecast for the current quarter, intensifying investor concerns about the social media giant’s unprecedented spending on artificial intelligence (AI).
The company said third-quarter revenue will be US$61bil to US$64bil, with the midline of that range below the average analyst estimate of US$63.2bil, according to data compiled by Bloomberg.
Meta relies on its advertising business to finance its expensive bets on AI products and infrastructure, including data centres and AI-powered glasses.
Investors have questioned how Meta will ultimately recoup its AI investments, and balked earlier this year when chief executive officer Mark Zuckerberg increased projected spending to as much as US$145bil.
Meta on Wednesday narrowed its full-year capital expenditure forecast to US$130bil to US$145bil, slightly lifting the bottom end from a previous projection of US$125bil to US$145bil.
Meta is spending hundreds of billions to compete against American tech rivals, including Alphabet Inc, OpenAI and Anthropic PBC, in a race to develop leading AI models and products.
It has struggled at times to convince investors that it will someday bring in enough sales and profit to justify that spending. The stock has declined 11% so far this year.
Meta has announced several new AI-related business lines in recent months, including a consumer chatbot subscription and a pay-to-use AI model for developers.
Meta is one of the tech industry’s heaviest spenders when it comes to AI data centres, just this week announcing a partnership with BlackRock Inc on a US$14bil complex in El Paso, Texas.
It’s building another data centre in rural Louisiana that is expected to cost upwards of US$250bil.
Much of its investment is fuelled by advertising that Meta runs on its flagship social networking products, Facebook and Instagram.
Meta reported revenue of US$60.8bil for the quarter ended June 30, slightly above the US$60.3bil that analysts projected.
“Meta’s strong revenue growth will once again be overshadowed by its capital expenditure projections,” wrote Minda Smiley, a senior analyst at Emarketer.
“Even though Meta didn’t raise projections, that won’t stop investors from pressing for more information regarding plans for a potential computing business – and any other details on how Meta is thinking about monetising AI.”
The company is also facing other expenses. It narrowed its full-year expense outlook Wednesday to US$165bil to US$169bil, a jump meant to incorporate US$2.4bil in penalties related to legal proceedings, according to a company filing.
Thousands of individuals and US school districts are suing Meta and other major social media companies over allegations that their products are addictive and harmful to minors. — Bloomberg
