By Barbara Ortutay, Technology Writer
SAN FRANCISCO (AP) --Investments in artificial intelligence will account for a significant increase in Facebook parent company Meta’s 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.
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’t say how much it expects to spend on AI next year, the company made it clear it would be significant.
The prospect of soaring expenses can often spook investors, but analysts said Meta’s latest results show it can afford it, at least for now.
“The market’s positive response to Meta’s 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 โ as we saw last week with Alphabet’s YouTube โ then the stock may seem more risky,” said Debra Aho Williamson founder and chief analyst at Sonata Insights.
She added that Meta stands out from other tech companies with AI ambitions because it already brings in a “massive amount” of advertising revenue โ rather than trying to build a new business from scratch.
“And unlike Google, which is grappling with making changes that will impact its core ad business, most of Meta’s AI investments are either aimed at making advertising on its properties work better or at building new features that could eventually become revenue drivers,” Williamson said.
The Menlo Park, California-based company earned $13.47 billion, or $5.16 per share, in the April-June period. That’s up 73% from $7.8 billion, or $2.98 per share, in the same period a year earlier.
Revenue rose 22% to $39.07 billion from $32 billion.
Analysts, on average, were expecting earnings of $4.72 per share on revenue of $38.26 billion, according to a poll by FactSet.
“We 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,” said CEO Mark Zuckerberg in a statement. During a conference call with analysts, Zuckerberg said Meta is in a “fortunate position” where strong results give it the opportunity to invest in the future.
The number of daily active users for Meta’s family of apps โ Facebook, Instagram, WhatsApp and Messenger โ 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’s X rival, is about to hit more than 200 million monthly users.
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.
The company hasn’t given guidance for 2025 yet โ it said it will do so during its fourth-quarter earnings call โ but it expects infrastructure costs to be a “significant driver of expense growth” 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 “significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.”
Meta is in a good position to grow “at a much faster pace than the competition in both the AI and ad spaces going forward,” said Thomas Monteiro, senior analyst at Investing.com.
“That’s because Zuckerberg’s 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, 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,” he added.
Monteiro added that Meta’s strategy of focusing its growth on younger users outside of the U.S. appears to be paying off, though the numbers “would have been even better” were it not for its Reality Labs segment dragging revenue lower.
Meta’s stock rose $23.67, or 5%, to 498.50 in after-hours trading.
Harvey Weinstein hit with new sex crime charge in New York
Harvey Weinstein pleaded not guilty Wednesday to a new sex crime charge in New York, as he awaits retrial in his landmark #MeToo case.
Details of the new allegations were not immediately available. He was charged with committing a criminal sex act.
The jailed ex-movie mogul has long maintained that any sexual activity was consensual.
Prosecutors revealed last week that Weinstein had been indicted on additional sex crime charges that weren't part of the case that led to his now-overturned 2020 conviction. But the new indictment was sealed until his arraignment.
Prosecutors have said that the grand jury heard evidence of up to three alleged assaults โ two in hotels in the Tribeca neighborhood and one at a lower Manhattan residential building. The purported incidents took place from the mid-2000s to 2016, prosecutors said.
But it's not clear whether any of those allegations underlie the new indictment.
While bracing for the new charges, Weinstein also is awaiting retrial after New York state's highest court this spring overturned his 2020 conviction on rape and sexual assault charges involving two women. The high court, called the Court of Appeals, ordered a new trial, which is tentatively scheduled to begin Nov. 12.
The Court of Appeals ruled that the then-trial judge unfairly allowed testimony against him based on allegations that were not part of the case. That judge's term expired in 2022, and he is no longer on the bench.
Prosecutors have said they'll seek to fold the new charges into the retrial, but Weinstein's lawyers say it should be a separate case.
Weinstein, who also was convicted in 2022 in a Los Angeles rape case, remains behind bars while awaiting his New York retrial.
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