Facebook owner Meta claims artificial intelligence can boost prospects; stocks jump

April 26 (Reuters) – Meta Platforms Inc ( META.O ) CEO Mark Zuckerberg said on Wednesday that AI helped the company boost traffic to Facebook and Instagram and earn more in ad sales, as it reported quarterly revenue well above analysts’ expectations.

Meta shares rose 1[ads1]2% in after-hours trading, adding more than $50 billion to its market value and continuing a rally in tech stocks that started after Google parent Alphabet Inc ( GOOGL.O ) and Microsoft Corp ( MSFT.O ) posted strong results on Tuesday .

Meta lowered its cost outlook for the year, saying expenses could be less than the company’s forecast in March, and also beat expectations for first-quarter earnings and revenue, which rose for the first time in nearly a year.

The company, which has been slow to adopt AI-friendly hardware and software systems for its core business, has undertaken several costly overhauls to strengthen its core business, including a massive project to upgrade its AI capabilities.

“At this point, we are no longer behind in building out our AI infrastructure,” Zuckerberg said on a conference call. “And on the contrary, we now have the capacity to do leading-edge work in this space at scale.”

AI recommendations increased time spent on Instagram by 24% in the January-March quarter, Meta said.

“I think like Alphabet, a lot of Meta’s AI investments have gone into the advertiser side,” said James Cordwell, analyst at Atlantic Equities.

“So as a consumer, we may not see the fruits of their labor in that area, but it certainly seems like they are able to use more advanced algorithms to maintain some level of ad targeting.”

Meta has also embarked on an aggressive cost-cutting drive, with plans to eliminate 21,000 jobs and flatten its middle management structure as it works toward Zuckerberg’s goal of making 2023 the “year of efficiency.”

The results indicated that the tightening drive had “started stronger than expected for Meta,” Insider Intelligence analyst Debra Aho Williamson said.

“In this economic environment – ​​and after the disaster that was 2022 – 3% year-over-year revenue growth is an achievement. Meta’s strong second-quarter revenue guidance is another indicator that the company may be starting to emerge from the woods.”

The social media giant faced a tough 2022 as an e-commerce boom sprung from the pandemic, while rivals such as TikTok captured young users and Apple Inc’s ( AAPL.O ) privacy updates cut access to the user data around which it built its advertising business.

Reuters graphics


Spending on AI retooling has boosted the company’s capital spending, which came in slightly below expectations of $7.1 billion for the quarter. Analysts had forecast $7.2 billion in capital spending in the quarter, based on the company’s annual forecast of $30 billion to $33 billion, which it kept unchanged.

The company opened up the possibility that it could increase capital spending while building products for generative AI, a new technology that can create human-like writing, art and other content.

“Zuckerberg is well aware that his spending habits are being watched very closely and any renewed effort to move his budget into untested territory will not go down well,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“That said, it’s very difficult to pinch to the top, which makes Meta walk a very fine line between keeping the lights on and making the future bright enough to excite investors.”

Meta said it continued to expect operating losses at its metaverse-oriented Reality Labs unit to widen in 2023. The company had invested billions of dollars in the unit, which lost $13.7 billion last year.

Zuckerberg said he remained committed to the investments.

“A narrative has developed that we’re somehow moving away from focusing on the metaverse vision. I’ll just say up front: that’s not accurate,” he said. “We have focused on both AI and the metaverse for many years now, and we will continue to focus on both.”

Meta cut its annual spending forecast to between $86 billion and $90 billion, down from the $86 billion to $92 billion it had predicted in March, when it announced its second round of layoffs.

The company said its quarterly cost per ad fell 17% from a year earlier, while it expects revenue between $29.5 billion and $32 billion for the current quarter, compared with analysts’ estimates of $29.53 billion, according to Refinitiv data.

Net income for the first three months of the year fell to $2.20 per share from $2.72 a year earlier, but beat expectations of $2.03 per share.

First-quarter revenue rose 3% to $28.65 billion, beating the average estimate of $27.66 billion.

Reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur

Our standards: Thomson Reuters Trust Principles.

Akash Sriram

Thomson Reuters

Akash reports on technology companies in the US, electric car companies and the aerospace industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a PhD in conflict, development and security from the University of Leeds. Akash’s interests include music, football (soccer) and Formula One.

Source link

Back to top button

mahjong slot