Meta shares fall as frustration grows over AI spending plans
Mark Zuckerberg said Meta intends to sell for the first time AI tools to other companies
Meta's stock experienced a decline as growing dissatisfaction emerged regarding its AI investment strategies.
On Wednesday, Meta's shares plummeted as investors reacted negatively to the company's commitment to ongoing artificial intelligence (AI) project spending, even as profits diminished.
The company, which owns Instagram and Facebook, saw its shares drop by 11%. This followed the release of its financial results for the April to June quarter, which showed a 28% increase in revenue from the previous year, reaching $61 billion (£45.6 billion). However, profits decreased by 14% to $6 billion.
Meta announced an increase in its projected spending for the year, from $125 billion three months ago to between $130 billion and $145 billion, with the majority allocated to AI initiatives.
CEO Mark Zuckerberg stated that the company's AI expenditures were "accelerating every part of our core business" and revealed plans to offer this technology for sale to other enterprises.
Susan Li, Meta's chief financial officer, informed financial analysts that selling their technology to other companies would help generate returns on their AI investments. She remarked, "By 2028, we'll have turned over a lot of cards."
However, these new business ventures have not yet materialized. Meta's free cash flow for the quarter, representing the cash retained after operational expenses, was $784 million. According to its financial records, this marks the lowest level for this metric in at least five years. Last week, Google also reported its lowest-ever amount of leftover cash, which similarly caused its stock to fall.
Regarding AI spending, Zuckerberg commented, "I get that this is a big bet across the industry. My personal bet is that the people who invest in this will feel very good and be rewarded over time."
He further explained during the call that Meta's AI capabilities and models were boosting engagement on Instagram and Facebook, and enhancing the ability of smaller businesses to create advertisements. Zuckerberg also mentioned that the company was developing AI agents, which are AI chatbots designed to operate with a degree of autonomy.
These agents, Zuckerberg stated, "will be the next wave of our product line in the months and years to come." He added, "Soon, we'll have agents that can work 24/7 on your behalf. Great personal agents need to just work out of the box. I'm very excited about this and we will have more to share soon." He also asserted, "We're the best company in the world at scaling experiences to billions of people."
Concerning Meta's unprecedented plans to sell AI models and computer tools to other firms, Zuckerberg indicated that the initial step involves making its Muse Spark AI model "easier for companies to integrate." He elaborated, "We expect to build a large business for large businesses. We have more coding and product tools on our roadmap."
While Zuckerberg acknowledged that this move would require flexing "a different muscle than we've historically had," he emphasized that the financial opportunity was too significant to overlook. He concluded, "It's not just about selling compute; it's the API services and the productivity services and I think there is a very, very large opportunity there and we're quite focused on that."