NEW YORK, July 31 — Meta Platforms forecast third-quarter revenue well above analysts’ estimates on Wednesday, as artificial intelligence once more powered its core advertising business, sending its shares soaring 11 per cent in extended trading.
The bumper results could ease investor worries about the social media giant’s frenzied pace of spending, at least for now, as it seeks to change Wall Street’s impression that it lags rivals including Microsoft and Alphabet’s Google in the AI race.
Meta raised the bottom end of its annual capital expenditures forecast by US$2 billion, to a range of between US$66 billion (RM280 billion) and US$72 billion, as CEO Mark Zuckerberg told analysts on a call that AI was making big leaps possible in its business that makes money by selling ads on Facebook and Instagram.
Rising costs to build out data centre infrastructure and employee compensation costs — Meta has been poaching researchers with mega salaries — would push the 2026 expense growth rate above the pace in 2025, Meta said. The company is planning higher capital expenses next year as well.
“I think there are all these questions that people have about what are going to be the timelines to get to really strong AI or superintelligence … we’ve observed the more aggressive assumptions, or the fastest assumptions, have been the ones that have most accurately predicted what would happen. I think that that just continued to happen over the course of this year too,” Zuckerberg said on a conference call with analysts.
Investors have largely backed Zuckerberg’s pursuit of superintelligence — a hypothetical concept where AI surpasses human intelligence in every possible way — pushing the company’s stock up nearly a fifth so far this year.
Meta’s post-market stock gains on Wednesday, along with those of Microsoft’s, added a combined half a trillion dollars in stock market value.
Microsoft said on Wednesday it expects capital expenditure to exceed US$30 billion in its fiscal first quarter, far above analysts’ estimate of US$23.75 billion. At that pace, the company would spend roughly US$120 billion on AI this fiscal year.
The update came a week after Google parent Alphabet raised its capital spending plans for the year to about US$85 billion and signalled more to come next year to meet surging demand for AI services.
‘Push very aggressively’
For the third quarter, Meta said it expected total revenue of US$47.5 billion to US$50.5 billion, compared with analysts’ average estimate of US$46.15 billion, according to data compiled by LSEG. Its third-quarter guidance assumed a 1 per cent benefit from a weak dollar. It said year-over-year revenue growth in the fourth quarter would be slower than in the third quarter.
“AI-driven investments into Meta’s advertising business continue to pay off … But Meta’s exorbitant spending on its AI visions will continue to draw questions and scrutiny from investors who are eager to see returns,” Emarketer senior analyst Minda Smiley said.
She noted that the company’s earnings “come against a backdrop of regulatory challenges that Meta faces in the US and abroad, adding more uncertainty to its future.”
US antitrust regulators have sued Meta to force it to restructure or sell Instagram and WhatsApp, claiming the company sought to monopolise the market for social media platforms used to share updates with friends and family. With court papers due in September, the judge overseeing the case is unlikely to rule until later this year at the earliest.
Zuckerberg testified in April that the company was initially slow to recognise the competitive threat of TikTok, and that Meta has over the years tried to build many apps that never gained traction.
The founder-CEO has pledged to spend hundreds of billions of dollars to build massive AI data centres, having shelled out US$14.3 billion for a stake in startup Scale AI and poached its 28-year-old billionaire CEO, Alexandr Wang.
After a lacklustre reception for its Llama 4 model that led to staff departures, Meta has tried to revitalise its AI push by sparking a high-stakes talent war in which it has doled out more than US$100 million in pay packages to researchers from rival firms.
“We’re just going to push very aggressively on all of that,” Zuckerberg said on the conference call, referring to Meta’s AI strategy.
In the second quarter, AI-powered ad recommendations drove about 5 per cent more conversions on Instagram and 3 per cent on Facebook, the company said. Ad conversions refer to a user making a purchase or a commitment after clicking or viewing an ad.
The tech giant recently introduced an AI-driven image-to-video ad creation tool under its Advantage+ suite, allowing marketers to generate video ads from static images.
Meta reported revenue of US$47.52 billion for the quarter ended June 30, which surpassed analysts’ average estimate of US$44.80 billion. Profit per share of US$7.14 for the second quarter also exceeded estimates of US$5.92.
Instagram, whose Reels product competes with ByteDance’s TikTok and YouTube Shorts for ad dollars in the popular short video format, is set to account for more than half of Meta’s ad revenue in the US this year, according to eMarketer. — Reuters
