AI boosts ad revenue, Meta's financial report shines, stock price surges over 7% after hours

The social media giant Meta has released its second-quarter financial report, with revenue and profit exceeding analysts' expectations. Meta successfully utilized AI to target users accurately, leading to digital ad revenue of $38.3 billion and an EPS of $5.16, significantly higher than analysts' expectations. Meta's stock price surged more than 7% in after-hours trading.

AI Boosts Ad Revenue

Meta's second-quarter sales increased by 22.1% year-on-year, reaching $39.07 billion. This exceeded analysts' expectations, primarily due to a 10% increase in ad impressions and a 10% increase in the average price per ad, resulting in digital ad revenue of $38.3 billion, accounting for 98% of total revenue.

Metaverse Still in Loss, Zuckerberg Reaffirms Endorsement

The performance of Meta's beloved metaverse continues to disappoint, with Meta's Reality Labs division widening its losses to $4.88 billion. The CFO stated that due to ongoing product development efforts and further investments in expanding the ecosystem, operating losses are expected to increase significantly compared to the same period last year.

However, Zuckerberg mentioned that the popularity of Ray-Ban glasses exceeded expectations, leading to a supply shortage. Sales of Quest 3 also surpassed expectations, with Zuckerberg believing it to be the best mixed reality (MR) head-mounted device in its price range. In addition to gaming, people are increasingly using Quest for general computing purposes, such as watching videos, browsing websites, and expanding PC functionality through virtual desktops.

Meta is still investing in the metaverse? Meta is hiring for positions related to generative AI, aiming to enhance immersive experiences across platforms.

Raising Annual Capital Expenditure, Actively Investing in AI

Meta has raised its annual capital expenditure to $37 billion to $40 billion, up from the initial range of $35 billion to $40 billion, to actively invest in AI research and product development.

Zuckerberg recently promoted Meta's open-source AI Llama 3.1, stating it is the decentralized, secure, and autonomously controlled AI future. During the earnings call, it was mentioned that Meta has begun developing the next generation Llama 4. The computational requirements for training Llama 4 may be nearly 10 times higher than those for Llama 3, and future models will continue to grow beyond this range.

Considering the long preparation time required for launching new infrastructure projects, Zuckerberg prefers to take risks and build capabilities before they are needed, rather than being late to the game. This is also the unanimous determination of several tech giants. While significant upfront investments are needed in the field of AI, no one is willing to miss out on opportunities. However, at least Meta has successfully utilized AI technology to significantly increase its ad revenue source, giving it the confidence to continue investing funds. Meta's stock price surged more than 7% after hours.