\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/07\/GettyImages-1968503455-e1722466962208.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
Investments in artificial intelligence will account for a significant increase in Facebook<\/a> parent company Meta\u2019s expenses in the coming year, but stronger-than-expected revenue from its advertising business was enough to reassure investors that its business is on the right track.<\/p>\n Meta Platforms Inc. reported stronger-than-expected results for the second quarter on Wednesday, sending shares sharply higher in after-hours trading. While it didn\u2019t say how much it expects to spend on AI next year, the company made it clear it would be significant.<\/p>\n The prospect of soaring expenses can often\u00a0spook investors<\/a>, but analysts said Meta\u2019s latest results show it can afford it, at least for now.<\/p>\n \u201cThe market\u2019s positive response to Meta\u2019s earnings report is a bellwether for AI stocks. If a company can show strong results from its core business, its investments in AI will be seen more positively. If the core business is showing any sign of weakness \u2014 as we saw last week with Alphabet\u2019s YouTube<\/a> \u2014 then the stock may seem more risky,\u201d said Debra Aho Williamson founder and chief analyst at Sonata Insights.<\/p>\n She added that Meta stands out from other tech companies with AI ambitions because it already brings in a \u201cmassive amount\u201d of advertising revenue \u2014 rather than trying to build a new business from scratch.<\/p>\n \u201cAnd unlike Google<\/a>, which is grappling with making changes that will impact its core ad business, most of Meta\u2019s AI investments are either aimed at making advertising on its properties work better or at building new features that could eventually become revenue drivers,\u201d Williamson said.<\/p>\n The Menlo Park, California-based company earned $13.47 billion, or $5.16 per share, in the April-June period. That\u2019s up 73% from $7.8 billion, or $2.98 per share, in the same period a year earlier.<\/p>\n Revenue rose 22% to $39.07 billion from $32 billion.<\/p>\n Analysts, on average, were expecting earnings of $4.72 per share on revenue of $38.26 billion, according to a poll by FactSet.<\/p>\n \u201cWe had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,\u201d said CEO Mark Zuckerberg in a statement. During a conference call with analysts, Zuckerberg said Meta is in a \u201dfortunate position\u201d where strong results give it the opportunity to invest in the future.<\/p>\n The number of daily active users for Meta\u2019s family of apps \u2014 Facebook, Instagram, WhatsApp and Messenger \u2014 was 3.27 billion for June, an increase of 7% from a year earlier. The company no longer breaks out user figures for Facebook as it had in the past. The company did disclose recently that WhatsApp has reached more than 100 million monthly users in the U.S. and Zuckerberg said that Threads, Meta\u2019s X<\/a> rival, is about to hit more than 200 million monthly users.<\/p>\n Meta said it expects its third-quarter revenue to land in the range of $38.5 billion to $41 billion. Analysts are expecting $39.1 billion.<\/p>\n The company hasn\u2019t given guidance for 2025 yet \u2014 it said it will do so during its fourth-quarter earnings call \u2014 but it expects infrastructure costs to be a \u201csignificant driver of expense growth\u201d in the coming year. Like other big tech companies, Meta is investing heavily in building its artificial intelligence capacity, including in data centers, and expects \u201csignificant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.\u201d<\/p>\n Meta is in a good position to grow \u201cat a much faster pace than the competition in both the AI and ad spaces going forward,\u201d said Thomas Monteiro, senior analyst at Investing.com.<\/p>\n \u201cThat\u2019s because Zuckerberg\u2019s company keeps showing signs that it is able to keep growing at the 20%+ per quarter level in a much more efficient way than other big tech peers, such as Alphabet and Microsoft<\/a>, for example; which are not only struggling to keep revenue growth in the double digits, but also are progressively taking a bigger hit on the margins side,\u201d he added.<\/p>\n Monteiro added that Meta\u2019s strategy of focusing its growth on younger users outside of the U.S. appears to be paying off, though the numbers \u201cwould have been even better\u201d were it not for its Reality Labs segment dragging revenue lower.<\/p>\n Meta\u2019s stock rose $23.67, or 5%, to 498.50 in after-hours trading.<\/p>\n<\/div>\n CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n\nRecommended Newsletter:<\/strong><\/p>\n