Mark Zuckerberg Warns Investors Meta’s A.I. Bet May Take ‘Years’ to Pay Off
As Meta continues to pour money into A.I. infrastructure like data centers and GPUs, CEO Mark Zuckerberg warns investors it might take a while before his company’s A.I. bet pays off. Yesterday (July 31), the social media giant reported a 7 percent year-over-year increase in total costs during the April-June quarter, driven by A.I.-related expenses. On the earnings call, Zuckerberg told analysts it should come as no surprise that it may take “years” before its generative A.I. business becomes profitable.
The good news is that Meta’s core advertising business is going strong. The company reported $39 billion in revenue for the quarter, a 22 percent jump from last year and beating Wall Street expectations. Quarterly profit soared 73 percent to $14.47 billion. Meta shares jumped 6 percent after earnings were released.
“We don’t expect our [generative] A.I. products to be a meaningful driver of revenue in 2024,” Susan Li, Meta’s chief financial officer, told investors during the call. “But we do expect that they’re going to open up new revenue opportunities over time that will enable us to generate a solid return off of our investment.”
So far, Meta has rolled out a slate of A.I. products, joining the ranks of Google, Microsoft and Amazon as Big Tech companies compete to build the best generative A.I. applications. In late July, the company unveiled Llama 3.1, the latest iteration of its family of large language models, as well as AI Studio, a tool that allows Instagram creators to create A.I. avatars of themselves that can interact with their followers. Months prior, Meta released its collection of A.I. celebrity chatbots across Facebook, Instagram and WhatsApp, though the company quietly shut them down after seeing low user engagement.
While Meta hasn’t monetized these products just yet, the company’s Ray Ban Smart Glasses appear to be doing well, which Zuckerberg noted as a “very positive surprise.” The glasses, which include Meta’s A.I. assistants that can answer questions using voice commands in real time, are doing better than expected, according to the company. The second generation of the smart glasses has reportedly sold more in the last few months than the original version did over two years.
To continue powering these A.I. products, Meta anticipates A.I. infrastructure costs to be between $37 to $40 billion by the end of 2024—higher than its previous estimate. That spend is expected to continue into the following year. “While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts,” Meta’s CFO wrote in the company’s Q2 earnings statement.
Looking ahead, on top of enhancing its existing A.I. tools, Meta plans to continue rolling out new A.I. features. It’s currently looking at ways to use generative A.I. to “enhance the core ads business,” the company said. It’s also working on A.I. agents for businesses that aim to help drive sales and save money. Select enterprises are currently testing the agents, though Meta didn’t say when they will be widely available. “I just think that there’s huge potential,” Zuckerberg said on the earnings call.