Meta sees earnings surge in Q3, cautions on rising AI spending

Facebook parent Meta posted strong revenue and profit growth in the third quarter on the back of increased digital ad spending but cautioned that AI spending is expected to rise.

The social media company’s shares dipped about 3% in after-hours trading.

The California-based firm’s net profit surged 35% year-on-year to $15.7 billion. Its revenue in the quarter rose to $40.6 billion, up 19% from the corresponding previous quarter.

“It’s clear that there are a lot of new opportunities to use new AI advances to accelerate our core business that should have strong ROI over the next few years, so I think we should invest more there,” Meta Founder and Chief Executive Officer, Mark Zuckerberg, said, during the earnings call.

“Our AI investments continue to require serious infrastructure, and I expect to continue investing significantly there too,” he added.

AI has been a significant area of focus for the company, which has developed various AI services such as Meta AI, creator AIs, business AIs, as well as internal coding and development AIs.

Its AI assistant, Meta AI, available across Meta’s suite of apps—WhatsApp, Messenger, Instagram, and Facebook—enables users to pose inquiries on a wide array of topics.

“We are seeing rapid adoption of Meta AI and Llama, which is quickly becoming a standard across the industry,” remarked Zuckerberg.

Meta has been expanding its Llama family of foundation models, including the first frontier-level open-source model, as well as new and industry-leading small and medium-sized models. This quarter, the company released Llama 3.2, including the leading small models that run on device and open source multimodal models.

“The Llama 3 models have been something of an inflection point in the industry but I'm even more excited about Llama 4 which is now well into its development. We are training the Llama 4 models on a cluster that is bigger than 100,000 H100s or bigger than anything that I've seen reported for what others are doing,” Zuckerberg noted.

The Meta chief expects the smaller Llama 4 models to be ready sometime early next year.

AI spends

Tech giants like Meta, Microsoft, and Google have significantly increased their capital expenditure to expand their server and data centre infrastructure, driven by the exponential growth of artificial intelligence (AI) and its demanding computational requirements.

Meta’s capital expenditure for the third quarter was $9.2 billion, driven by investments in servers, data centres, and network infrastructure.

The company expects full-year 2024 capital expenditure to be $38 billion to $40 billion, updated from its prior outlook of $37 billion to $40 billion.

“We continue to expect significant capital expenditure growth in 2025. Given this, along with the back-end weighted nature of our 2024 CapEx, we expect a significant acceleration in infrastructure expense growth next year,” Meta’s Chief Financial Officer Susan Li said, during the call.

Ads business

The Facebook and Instagram parent saw an 18.5% growth in its advertising revenue—its main revenue source—which increased to $39.9 billion from $33.6 billion in Q3 FY23. The revenue of the total family of apps touched $40.3 billion; this includes advertising revenue.

Meta’s family daily active people was 3.29 billion on average for September 2024, an increase of 5% year-over-year.

Moreover, Reality Labs, which works on virtual reality and augmented reality gadgets and Meta’s metaverse vision, posted $270 million in revenue in Q3, up 29% driven by hardware sales. The unit’s operating loss stood at $4.4 billion.

Li explained that Reality Labs expenses were $4.7 billion, up 19% year-over-year, driven primarily by higher headcount related expenses and infrastructure costs.

The social media giant ended the third quarter with 72,404 employees, up 9% from a year ago.

“As we are evaluating where there are opportunities for us to make good investments, we really think about there is a bucket of very ROI-driven headcount opportunities,” Li said.

Meta expects full-year 2024 total expenses to be between $96 billion and $98 billion, updated from its prior outlook of $96 billion to $99 billion.

​​The social media firm expects Q4 total revenue to be in the range of $45 billion to $48 billion. In the same period last year, revenue stood at $40.1 billion. A midpoint of the forecast, $46.5 billion, would signify a 16% year-over-year growth.

“We are seeing ongoing momentum across our core priorities, and we have exciting opportunities ahead of us to drive further growth in our core business in 2025 and capitalise on the longer-term opportunities ahead,” Li noted.