(San Francisco) Meta saw its profits soar in the spring thanks to online advertising, reassuring investors who are more willing to accept huge spending on artificial intelligence (AI) if the core business holds up.
Net profit for the parent company of Facebook, Instagram and WhatsApp rose 73% year-on-year to $13.5 billion in the second quarter, on revenue of $39 billion (+22%), exceeding its own expectations and those of the market.
Its shares were up more than 7% in electronic trading after the close of trading on the New York Stock Exchange on Wednesday.
The market is currently particularly interested in the spending of large technology groups on generative AI – often considered too high – and the potential returns on investment – never fast enough.
But “Meta has earned investors’ patience by investing in its future vision,” said Jasmine Enberg of Emarketer. “They are more comfortable with the AI-related expenses.” […] because the advertising business is strong.”
The Californian group, which was penalized on the stock market in the first quarter due to increased spending, has again raised the range of its capital investments, now between 37 and 40 billion dollars for the year.
AI Assistant
Since the success of ChatGPT, technology giants have been rapidly deploying models and applications capable of producing high-quality content based on a simple query in everyday language.
But these models require new computing infrastructures, lots of energy, highly skilled engineers, etc.
Meta unveiled in April the new version of Meta AI, its assistant that answers users’ questions, like ChatGPT. It has gained visibility on the group’s platforms and skills thanks to Llama 3, the latest version of Meta’s AI model, comparable to GPT-4 (OpenAI) and Gemini (Google).
“Meta AI is well on its way to being the most widely used AI assistant by the end of the year,” Zuckerberg assured analysts during the conference.
The amount of computing resources needed to train Llama 4 “will certainly be ten times greater than that used for Llama 3,” he acknowledged.
And in the longer term, it is difficult to predict the exact needs, “but given the lead times for commissioning, I prefer to take the risk of strengthening capacities upstream rather than too late,” he said.
Microsoft (OpenAI’s first investor) and Google are in the lead, but the world’s number two in digital advertising wants to become “the world’s leading AI company.”
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With significant advantages: more than 3.2 billion people use at least one of Meta’s applications every day.
“And unlike Google, which is facing changes that will impact its core business, most of Meta’s investments in AI are improving how advertising works on its platforms, or creating new features that could become revenue streams,” said Debra Williamson of Sonata Insights.
The ability of models to answer users’ questions, or even converse with them, promises to revolutionize online search.
Meta, for its part, is already capitalizing on AI with its content recommendation and advertising targeting algorithms.
“Our systems are better at predicting who their ads will interest than advertisers,” Zuckerberg said.
Generative AI will soon create ads itself, and personalize them based on the user, he continued. And “in the longer term, brands will give us their business objective and we will do the rest for them.”
In the second quarter, Meta benefited from advertising sales based on Reels, these short entertaining videos copied from TikTok.
“There has been an alignment of the planets between the increase in opportunities for brands and the increase in the average price of ads,” commented Max Willens of Emarketer.
“With such healthy margins, Meta investors should be comfortable with the company’s significant investment in its future plans.”
Even though the Reality Labs branch, responsible for developing devices and software for the metaverse (mixing of real and virtual universes via high-tech glasses and headsets), has once again increased its losses, to 4.5 billion dollars this quarter.