Meta Climbs to Fourth in WSB Rankings Amidst AI Spending Concerns and Stock Volatility
2min read Meta has recently climbed to the fourth position in the latest WSB rankings, marking a rise of seven places from the previous day. However, its stock saw a slight decline of 0.25%. The company, known as the owner of Facebook, issued a cautionary note that its infrastructure spending related to artificial intelligence is expected to "significantly accelerate" next year. Despite surpassing analysts' expectations in terms of both revenue and profit for the third quarter, this announcement has left investors with mixed feelings.
The announcement comes amid concerns about the capability of Meta's core social media business to continue driving enough digital advertising sales to offset the substantial costs associated with its extensive AI infrastructure projects. While Meta's third-quarter performance was robust, reporting total revenue of $40.59 billion with a net profit of $15.69 billion, the news about potential future expenses contributed to a 2.9% dip in its stock during after-hours trading.
Mark Zuckerberg, Meta's CEO, echoed the sentiment that the immediate infrastructure spending increase might not align with short-term investor preferences, despite the immense opportunities he perceives. The company continues to invest heavily in its Meta AI initiative, a generative chatbot over 500 million monthly active users, up from 400 million disclosed in September.
The third quarter also revealed Meta's strategic resource management; it maintained a specified cost structure with a total expenditure of $23.2 billion, demonstrating a cautious yet ambitious fiscal approach. Their forecast indicates a moderate improvement in spending predictions for the year, revising total spend estimates down to between $96 billion and $98 billion.
Investors remain cautious about Meta's spending. Earlier in the year, the company's outlook on expenditures led to a $200 billion loss in its market cap. Nonetheless, Meta has successfully rebounded from its 2022 stock price collapse, witnessing about a 500% surge from its lowest point, with a 67% increase so far this year.
Employee headcount discussions reveal that Meta has employed 72,404 individuals, showing an increase from 66,185 last year, which aligns with their strategy to drive efficiency while pursuing aggressive sectoral expansion, especially in the AI domain.
Meta's third-quarter earnings highlight continued dependency on its lucrative advertising wing, accounting for nearly its entire income. This is crucial as heightened marketing spends during holidays could significantly enhance profit margins.
Reality Labs, responsible for VR and AR tools like Quest headsets and smart Ray-Ban glasses, recorded a $4.4 billion loss, although it foresees exciting advances in smart eyewear indicated by consumer interest and technological progress.
Zuckerberg reiterated a long-term investment outlook, suggesting that returns in certain AI ventures might not materialize for years. Nonetheless, he expressed confidence that core business metrics like user engagement and monetization would deliver considerable future rewards, justifying the ongoing investment in AI infrastructure.
