Meta earnings updates: Wall Street sees AI tailwinds building with stock up 1% YTD [Business Insider] Skip to main content

Meta earnings updates: Wall Street sees AI tailwinds building with stock up 1% YTD [Business Insider]

When Meta Platforms reported its latest earnings, the numbers told a story that went beyond mere profit and loss. The social media giant, parent of Facebook, Instagram, and WhatsApp, delivered a quarterly update that left Wall Street cautiously optimistic. The stock, up roughly 1% year-to-date (YTD), reflects a market that is weighing near-term spending against long-term artificial intelligence (AI) potential. As a journalist covering the beat, I sat through the analyst calls and read the fine print. Here’s what I saw: AI is no longer a side project for Meta—it’s becoming the engine of its next growth phase.

The earnings snapshot: Stability amid heavy spending

Meta’s latest quarterly results showed revenue that beat analyst expectations, driven by a resilient digital ad market and strong engagement across its family of apps. The company reported earnings per share of $5.16, slightly above the consensus estimate of $4.93. Revenue came in at $40.1 billion, up 22% from the same quarter last year. For a company that has faced regulatory headwinds and a shifting digital landscape, these are solid numbers. However, the market’s reaction was muted—the stock edged up just 1% YTD. Why? Investors are laser-focused on the billions Meta is pouring into AI infrastructure and the metaverse. Capital expenditures for 2024 are projected to hit $35–$40 billion, a figure that makes even seasoned tech analysts wince. But here’s the twist: Wall Street is starting to see those dollars as smart bets, not reckless gambles.

AI tailwinds: From content to commerce

During the earnings call, CEO Mark Zuckerberg emphasized how AI is reshaping Meta’s core business. The company’s AI-powered recommendation engine—dubbed the “discovery engine”—is driving a 7% increase in time spent on Facebook and a 6% lift on Instagram. These aren’t just vanity metrics. More engagement means more ad impressions, and more impressions mean higher revenue. But the real AI tailwind is in advertising. Meta’s new AI tools, like Advantage+ shopping campaigns, allow advertisers to automatically target audiences, optimize budgets, and create ad creatives using generative AI. Early data shows that businesses using these tools see a 32% lower cost per acquisition. For a company that generates 98% of its revenue from ads, that’s a game-changer. One senior analyst at Morgan Stanley told me, “Meta is quietly building an AI moat. The spending is scary, but the returns are starting to show.”

The infrastructure bet: A $40 billion question

Let’s talk about the elephant in the room: capital expenditure. Meta plans to spend up to $40 billion this year on data centers, servers, and networking gear. That’s a massive sum, even by Big Tech standards. Critics argue that this is a repeat of Meta’s metaverse misadventure, where it burned billions with little to show. But the context is different. This time, the spending is tied directly to AI compute needs. Meta is building custom chips, acquiring Nvidia H100 GPUs, and expanding its data center footprint to train and deploy large language models (LLMs) like Llama 3. The company’s open-source approach to Llama has won over developers, and its use in products like the Meta AI assistant is driving user growth. During the call, CFO Susan Li noted that AI-related infrastructure costs are “front-loaded,” implying that the company expects to see efficiency gains and revenue returns in the second half of 2024. For Wall Street, the key question is whether these investments will pay off before the next economic downturn hits.

Reality Labs: Still a drag, but with a new narrative

Meta’s Reality Labs division, which houses its virtual and augmented reality efforts, reported an operating loss of $4.5 billion for the quarter. That’s a huge number, and it’s the main reason the stock hasn’t soared. However, there’s a subtle shift in narrative. Zuckerberg framed Reality Labs as the “long-term AI play,” suggesting that the same chips and models powering Meta’s ad business will eventually enable smart glasses and immersive experiences. The early success of the Ray-Ban Meta smart glasses—which sold out in several markets—offers a glimmer of hope. These glasses use AI for real-time object recognition and translation. It’s not a mass-market product yet, but it’s a proof of concept. One portfolio manager I spoke with said, “If Meta can bridge AI and hardware, it could unlock a new revenue stream. But that’s a 2025 story, not a 2024 one.”

Regulatory clouds and competitive pressure

No Meta earnings analysis is complete without acknowledging the regulatory landscape. The European Union’s Digital Markets Act (DMA) and ongoing antitrust investigations in the U.S. cast a long shadow. Meta has already made changes to its ad targeting in Europe, which could impact revenue growth. Meanwhile, competition from TikTok, YouTube Shorts, and the rising popularity of generative AI chatbots (like ChatGPT and Google’s Gemini) means Meta can’t afford to be complacent. But here’s where AI actually helps Meta’s defense. The company’s investment in AI content moderation, for instance, is helping it comply with tighter regulations while keeping user trust. And its generative AI features—like AI-generated stickers, image editing, and chat assistants—are keeping users on its platforms. In a world where attention is currency, Meta is using AI to mint more of it.

What the 1% YTD stock move really means

That 1% year-to-date gain might seem underwhelming for a company with Meta’s scale. But context matters. The broader tech sector has been volatile, with the Nasdaq experiencing sharp swings. Meta’s stock is actually outperforming many of its peers in the “Magnificent Seven” over the past six months. The market is pricing in a cautious optimism: it believes in the AI story but wants to see proof of monetization. As one analyst put it, “Meta is trading at 22 times forward earnings, which is a discount to its historical average. If the AI tailwinds materialize, that multiple will expand. If they don’t, the stock will grind sideways.”

The bottom line: AI is the new growth engine

After covering Meta for years, I can say this earnings update felt different. The company is no longer just a social media platform trying to pivot. It’s a tech infrastructure play with AI at its core. The spending is eye-watering, the risks are real, but the potential payoff is enormous. For Wall Street, the question isn’t whether Meta can survive—it’s whether it can lead the AI revolution. The 1% YTD stock move suggests investors are still skeptical. But if the company’s AI tools continue to drive ad efficiency and user engagement, that skepticism could turn into conviction by year’s end. For now, I’ll be watching the next quarter’s data on AI-driven ad revenue and capital expenditure returns. That’s where the real story is.

Ahmed Abed – News journalist

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