Meta's revenue and profit growth are expected to increase significantly, but it fell by more than 3% after hours due to AI investment.

Despite massive investments, the metaverse business is still struggling.
According to analysts, the main reason for the decline in metaverse stock price is the fact that the company is still in its early stages.Reality Labs, a division of Meta Universe, is still incurring losses.The division primarily generates profit from selling Meta's VR headset 'Quest' and smart glasses 'Ray-Ban Meta.'

Facebook's co-founder and Meta's CEO, Mark Zuckerberg, believes that by developing VR and AR technologies, the company can take a leading position in the potential next mainstream personal computing platform.

However, this investment has been costly for Meta.As of the earnings reports on Wednesday, Reality Labs has accumulated operating losses exceeding 58 billion dollars since 2020.According to the company's CFO, due to ongoing investments in product development and ecosystem expansion, the operating losses for Reality Labs are expected to significantly increase in 2024.

Nevertheless, Meta has not given up on its efforts towards the Metaverse. Zuckerberg unveiled the Orion device at the company's annual conference "Connect" in September, which generated a certain level of excitement and bolstered internal confidence at Meta for ambitious plans.

The Ray-Ban Stories smart glasses developed in partnership with the eyewear giant EssilorLuxottica have achieved unexpected success, increasing consumer interest in future Orion AR glasses. There are plans to gather developers to create apps for the device next year.

Accenture will continue to promote AI transformation, and next year's investment in facilities is expected to increase significantly.
While the Metaverse business is not performing particularly well, Meta anticipates that its holiday season revenue will exceed expectations, attributing the significant improvement in its core advertising business to AI enhancements.

According to the earnings report, Meta's third-quarter revenue increased by 19% compared to the same period last year, exceeding analysts' financial estimates. Mr. Zuckerberg attributed the revenue growth to AI investments, revealing that over 1 million advertisers are already using Meta's generative AI advertising tool.

AnalystsEnhancements in advertising tools utilizing AI and the success of the short video product 'Reels' powered by AI are expected to drive Meta's revenue growth this year.Many analysts predict that 2024 will be a breakthrough year for digital advertising as economic forecasts improve, interest rates decrease, and consumer spending continues. Advertising revenue accounts for a large portion of Meta's earnings, and the potential increase in ad spend during the holiday season could significantly boost the company's profits.

"Thanks to advances in AI in apps and businesses, we were able to have a good quarter. There was strong momentum in Meta AI, llama adoption, and AI-powered eyewear," said Mr. Zuckerberg.

The company,Plans to continue major investments in AI, with a significant increase in capital expenditures expected by 2025.It is stated that especially infrastructure spending will accelerate mainly due to the increase in depreciation expenses and the increase in operating expenses due to the increase in infrastructure.

Meta announced an expansion of MetaAI to more countries such as the United Kingdom and Brazil at the beginning of this month to compete against OpenAI's ChatGPT and Dall-E. Once fully deployed, Meta is expected to make MetaAI available in 43 countries and 12 languages.

Mr. Zuckerberg has emphasized several times in the past that the company is making significant investments in AI, which has helped change investors' perception of the company.

Meta's main AI products include various large language models (LLMs) to support chatbots, AI assistants integrated into various social apps, and AI-powered smart glasses. Meta deploys the Llama model family for consumer and advertising products, and has open-sourced the platform as open-source software.

According to Meta, companies like Accenture, DoorDash, and Goldman Sachs are using Llama to develop their own AI software.

The company is also developing a search function for its Meta AI service, allowing users to ask and receive answers to current issues. This is aimed at eliminating Meta's dependence on Google or Microsoft search engines to respond to specific user inquiries.

Most of Meta's long-term AI investments, even if realized, are expected to take several years to achieve significant revenue contributions, but the company is already optimizing advertising targeting and content recommendations through AI improvements, directly impacting performance.

Jesse Cohen, Senior Analyst at Investing.com, stated, "Meta is currently experiencing rapid growth, and it is clear that AI is driving this growth." However, he added, "Investors seem disappointed with the cost increase related to the company's forward guidance and AI capability development."

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Source: Bloomberg, WSJ, Investing
This article uses automatic translation in part.