Meta’s Profits Surge Amid AI Concerns

Meta, the parent company of Facebook, reported soaring quarterly profits, driven primarily by robust ad growth across its suite of social media platforms.

However, concerns about escalating expenses related to artificial intelligence (AI) initiatives led to a sharp decline in its share price on Wall Street.

Mark Zuckerberg, Meta’s founder and CEO, disclosed that net profit for the January to March period reached $12.4 billion, marking a substantial increase. Total revenue, largely derived from advertising revenue, surged by an impressive 27 percent, reaching $36.5 billion.

Analysts attribute Meta’s growth to its sophisticated advertising tools and the popularity of “Reels,” short algorithm-driven videos reminiscent of TikTok.

In a potential expansion of its revenue streams, Meta is exploring the possibility of introducing advertising on Threads, its text messaging platform akin to X (formerly Twitter).

Mike Proulx, Vice President at Forrester, views this move as an opportunity for advertisers to engage with audiences during real-time moments, providing an alternative to existing platforms.

Meta’s resurgence follows a strategic cost-cutting initiative in 2023, which included significant layoffs, aimed at enhancing efficiency following a challenging 2022. Despite a reduction in its global workforce, Meta’s financial performance remains robust.

However, concerns about rising expenses associated with AI investments triggered a decline in Meta’s share price in after-hours trading.

The company anticipates increased capital expenditures for 2024, primarily due to investments in AI technology.

Zuckerberg urged investors to exercise patience, emphasizing that the transition into AI would require several years and might result in stock market volatility.

Last week, Meta unveiled its latest AI version, integrated as an enhanced smart assistant across its platforms, including Instagram, WhatsApp, Messenger, and Facebook. Powered by LLaMA 3, Meta’s most potent language model, the AI technology is being deployed in multiple English-speaking countries, aiming to enhance user experiences and engagement.

While Meta strives to establish itself as a leader in AI, it faces stiff competition from tech giants like Microsoft, which benefits from partnerships with industry leaders like OpenAI.

AI is increasingly shaping the competitive landscape, with Microsoft leveraging its core cloud computing business to advance AI capabilities.

Despite challenges, Meta remains optimistic about its AI endeavors, leveraging its vast user base to test and refine AI applications rapidly.

However, concerns linger about its ability to compete effectively in the AI race, particularly against well-established players like Microsoft.

In addition to AI, Meta continues to invest in the metaverse, an emerging frontier that Zuckerberg envisions as the future of the internet.

Despite incurring substantial losses in its dedicated metaverse branch, Meta remains committed to advancing VR technology, evident in its collaboration with Ray-Ban on VR glasses.

As Meta navigates the evolving technological landscape, the company faces both opportunities and challenges in harnessing the potential of AI while addressing investor concerns about escalating costs.

With its strong financial performance and ambitious AI initiatives, Meta seeks to maintain its position as a leader in the digital ecosystem while shaping the future of technology and communication.

Jessica Bayley

Jessica Bayley is an international author and journalist. She covers global affairs, hard news, lifestyle, politics, technology and is also the author of "The Ladies of Belgium."