Meta’s Push Into AI Development Shows Promise With 73% Surge in Net Income

Meta’s push into AI development is seemingly working for the tech giant, as the company reported second fiscal quarter income that soared by 73%, on revenues up 22% to $39.07 billion, both of which beat analysts’ consensus estimates. Meta’s stock price shot up nearly 7% in after-market trading as a result of positive results.

Here are the top-line results:

Revenues: $39.07 billion, up 22% compared to $32 billion in 2023

Net income: $13.47 billion, an increase of 73% compared to $7.8 the year prior

Daily active users: 3.27 billion on average for June, up 7% year-over-year

Meta is deeply committed to the Big Tech arms race underway around AI, with the company pouring billions into development and product development around the fast-evolving technology, as Meta tries to keep pace with rivals Alphabet, Microsoft and Apple, along with OpenAI.

“Meta AI is on track to be the most used AI assistant in the world by the end of the year,” Meta founder and CEO Mark Zuckerberg said on Wednesday. “We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”

The Facebook and Instagram parent company said it expects third quarter 2024 revenue to be in the range of  $38.5-41 billion. Additionally, Meta expanded the range of estimated full-year 2024 capital expenditures from $35-40 billion to $37-40 billion.

“We currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” the company said on Wednesday.

Meta also warned that its Reality Labs unit will likely be an ongoing drain on earnings. It continues to operate at a growing loss year-over-year, due to product investment and development. The unit, which houses the tech company’s hardware and software development, recorded an operating loss of $4.48 billion on revenue of $353 million in the second quarter, up from $276 million a year before.

Meta has seen around $50 billion in cumulative losses from Reality Labs since 2020, underscoring Zuckerberg’s commitment to investing in the development of technology for the future.

“At the end of the day, we are in the fortunate position where the strong results that we’re seeing in our core products and business give us the opportunity to make deep investments for the future, and I plan to fully seize that opportunity to build some amazing things that will pay off for our community and our investors for decades to come,” Zuckerberg added during Wednesday’s shareholder call. “The progress we’re making on both the foundational technology and product experiences, suggests that we’re on the right track.”

The Meta CEO also noted that because of the consistent investment into Reality Labs, the tech giant is in a good position to continue growing the capabilities and usage of its AI products.

“We have a relatively long business cycle of starting a new product, scaling it to something that reaches a billion people or more, and only then really focusing on monetizing at scale,” Zuckerberg said of previous business operations compared to the current AI development and expansion.

“We’re still uncovering the wide range of use cases that it’s valuable for,” Zuckerberg said. “An important part of our vision is that we’re not just creating a single AI, but enabling lots of people to create their own AIs.”

The Meta CEO’s passion for AI development was palpable, saying in response to an analyst question, “It’s why they’re all the jokes about how all the tech CEOs get on these earnings calls and just talk about AI the whole time. It’s because it’s actually super exciting, and it’s going to change all these different things over multiple time horizons.”

Meta reported a 10% year-over-year increase in ad impressions delivered across the company’s family of apps, with the average price per ad also growing 10% compared to 2023.

In recent years, Zuckerberg has made an effort to slim down Meta’s workforce, however, this quarter, headcount remained relatively stagnant, only decreasing by 1% year-over-year.

Zuckerberg highlighted Meta’s family of apps’ growth, which he said has been a “bright spot.” WhatsApp now serves more than 100 million monthly active users in the U.S., the Meta CEO said, as Threads is nearing 200 million monthly active users.

Additionally, Zuckerberg pointed out Facebook’s growth among younger adults, which he said “really go against the public narrative around who’s using the app.”

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