Facebook owner Meta warns of worsening AI losses after sales narrowly beat forecast

San Francisco – Meta Platforms chief executive Mark Zuckerberg will ramp up heavy investments in artificial intelligence (AI) and other futuristic technologies, continuing a years-long tug of war between the company’s long-term bets and the core advertising business that provides the vast majority of Meta’s revenue. 

Mr Zuckerberg warned investors on Oct 30 that Meta will continue to spend significantly on infrastructure and other projects like the metaverse and AI-powered glasses, efforts he believes are core to the company’s future. This will be supported by the ads business, which is not generating the kind of momentum Wall Street expected. Meta shares fell more than 2.8 per cent in extended trading.

Meta cautioned that losses from Reality Labs, its division focused on AI and augmented reality technologies, will continue to widen “meaningfully” in 2024, adding that the 2025 budget is still being finalised. Reality Labs reported a US$4.4 billion (S$5.8 billion) operating loss in the quarter.

With costs projected to reach nearly US$100 billion in 2024, Meta is putting pressure on its core advertising business to fund the effort. Meta told investors on Oct 30 that revenue for the current quarter would be between US$45 billion and US$48 billion. Analysts were expecting fourth-quarter revenue of US$46 billion.

Mr Zuckerberg has worked to reframe the social media company as an AI innovator in recent years, changing investor perception of Meta’s potential growth. Meta has developed several key AI products as part of that pivot, including large language models used to power chatbots, an assistant built into its various social apps, and AI-powered smart glasses.

Meta is already working on the next version of Llama, the large language model that powers its AI products and services, and Mr Zuckerberg said Llama 4 will be faster, more powerful and more cost-effective than previous models.

Some of Mr Zuckerberg’s most ambitious projects, though, are still years away from mainstream consumption. Eventually, he hopes that users will work and play inside a digital universe known as the metaverse, which Meta is still building up.

The company also recently unveiled its first pair of augmented reality glasses, which can project images onto the physical world. Mr Zuckerberg hopes that those glasses, called Orion, may one day rival the smartphone. 

This focus on AI has helped fuel Meta’s stock price, which was up more than 67 per cent in 2024 at market close on Oct 30, making it one of the best-performing stocks in the S&P 500. But it has also come with a steep cost.

“Our AI investments continue to require serious infrastructure and I expect to continue investing significantly there,” Mr Zuckerberg said. BLOOMBERG