Meta raises AI spending forecast to $145 billion, plans new share issue; Q3 revenue beats estimates

Reuters

The company reported quarterly revenue of $64.60 billion, beating Wall Street estimates of $63.37 billion, according to data compiled by LSEG. Meta also projected fourth-quarter revenue above analysts’ expectations.

The Facebook and Instagram parent has been investing heavily in chips and data centres to compete more aggressively with OpenAI and Anthropic. The spending has put pressure on its historically strong free cash flow.

The proposed non-voting shares could help Meta fund acquisitions and attract top talent without diluting Chief Executive Mark Zuckerberg’s voting control, as competition in Silicon Valley’s AI race intensifies, Reuters reported.

Muse justifies AI investments

Meta now expects capital expenditure to range between $135 billion and $145 billion this year, compared with its earlier forecast of $130 billion to $145 billion.

Early adoption of its consumer-focused AI agent, Muse, and the launch of a competitive new series of AI models have helped the company justify its substantial investments to investors. However, some enterprises are restricting the agent’s access because of security concerns.

Meta is also facing mounting legal challenges. On Wednesday, a judge in New Mexico ordered the company to pay a $25 billion penalty after a jury found that it had misled state residents about how it shared user data with third parties and enforced policies on hate speech and misinformation. The case was linked to allegations involving British political consulting firm Cambridge Analytica.

In August, Meta agreed to pay as much as $18 billion over a decade and restrict teenagers’ use of Facebook and Instagram to settle claims brought by nearly all US states. The states had alleged that the company designed its platforms to be addictive to children.

The agreement removed a significant regulatory hurdle that had weighed on Meta’s stock and helped the company avoid a potentially lengthy trial that could have brought further internal documents about its treatment of young users into the public domain.

Advertising accounts for almost all of Meta’s revenue. Its Reels feature competes with TikTok and YouTube Shorts in the short-video market, while Threads challenges Elon Musk’s X. Meanwhile, the company is using AI to improve ad targeting and content recommendations, aiming to increase user engagement and strengthen its advertising business.