Meta Shares Fall 4% Despite 37% of Earnings Surge Driven by AI

TMTPOST -- Meta Platforms, Inc. shares fell around 4.1% Thursday after the Facebook operator posted robust-than-expected earnings but warned artificial intelligence (AI) related expenditures would accelerate significantly next year.

Credit：Meta

Meta beat Wall Street expectation both top and bottom line for the quarter ended September 30. Revenue popped 19% year-over-year (YoY) to $40.59 billion, beating analysts estimated $40.25 billion. Diluted earnings per share (EPS) was $6.03 with a 37% YoY increase, compared with projection of $5.25 per share. The company earned $15.69 billion, up 35% from $11.58 billion in the same period a year earlier.

"We had a good quarter driven by AI progress across our apps and business," said Meta CEO Mark Zuckerberg. "We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses." He revealed at an earnings call with analyts that Meta AI, a generative AI chatbot assistant, has more than 500 million monthly active users just a year after its launch. That represented a month-over-month increase of about 100 million users as the company said 400 million active users were using the AI assistant in September.

Revenue from advertising came in at $39.89 billion, up 18.7% YoY, accounting for 98.3% of total revenue for the third quarter. That was also beat analysts projected $39.71 billion. Reality Labs, the hardware unit that houses metaverse technologies, brought $270 million with a 29% YoY increase, missing expectation of $310 million.

Family daily active people (DAP), a metric reflecting the number of users who signed into at least one of Meta’s social media apps in a day, increased 5% YoY to 3.29 billion on average for September. Analysts had anticipated DAP to be 3.31 billion.

While almost all of Meta’s revenue came from the advertising, the miss in DAP is concerning. Emarketer analyst Jasmine Enberg believes the miss suggested Meta will need to squeeze more revenue out of its existing users as growth slows, though the company is in a good position to do so “as its AI-powered tools are boosting engagement by helping show users more of what they like and making its ads, particularly on Reels, more effective.”

The updated guidance raised more concerns over Meta’s spending as the company expected it will pour more money into developing AI while losses of its Reality Labs unit are deepening. The Menlo Park, California-based company full-year 2024 total expenses to be in the range of $96 billion to $98 billion, with upper end higher than its prior range of $96 billion to $99 billion. The full-year 2024 capital expenditures are anticipated to be in the range of $38 billion to $40 billion, updated from the previous $37 billion to $40 billion. For Reality Labs, Meta continued to expect operating losses this year to increase meaningfully YoY due to our ongoing product development efforts and investments to further scale our ecosystem.

“We continue to expect significant capital expenditures growth in 2025. Given this, along with the back-end weighted nature of our 2024 capital expenditures, we expect a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet,” Meta said in a press.

Zuckerberg acknowledged in a conference call with analysts that more infrastructure spending "is maybe not what investors want to hear in the near term," but said the company nonetheless would continue to invest. "Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there, too," said Zuckerberg. He added that the opportunities in AI "are really big."