Meta misses profit expectations, sticks to massive AI spending
Meta reported a 14 percent drop in net income due to heavy AI infrastructure spending and significant legal and severance costs, despite a 28 percent increase in advertising revenue. While the company beat revenue estimates, investors reacted negatively to the massive capital expenditure forecast and the company's aggressive pivot toward AI-driven cloud services.
Why it matters
Meta's struggle to balance massive AI investment with profitability highlights a growing tension in the tech sector, where investors are increasingly skeptical of the long-term financial returns on expensive AI infrastructure.
Facebook-parent Meta reported profits on Wednesday that fell short of Wall Street expectations, as the cost of staying in the race to deploy artificial intelligence, along with hefty legal and severance charges, hurt its bottom line.
The social media giant said net income dropped 14 percent from a year earlier to $15.8 billion.
Revenue, however, climbed 28 percent to $60.8 billion, beating estimates and underscoring the continued strength of its advertising business.
Shares in Meta were down as much as 12 percent in after-hours trading, a sign of analyst skepticism over the scale of the company's AI spending.
Its results contrasted with those of Microsoft, another tech giant that has faced investor doubts but beat analyst expectations on Wednesday, driven by its cloud and artificial intelligence businesses.
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