Meta Platforms CEO Mark Zuckerberg announced on Wednesday that the company’s use of artificial intelligence (AI) has helped to increase traffic to Facebook and Instagram, leading to greater ad revenue.
The company’s stock saw a 12% surge in after-hours trading, following strong earnings reports from Google and Microsoft. Meta has invested in expensive AI infrastructure upgrades to improve its core business, and Zuckerberg noted on a conference call that the company is now in a position to do leading work in AI at scale.
AI recommendations on Instagram boosted time spent on the platform by 24% in the first quarter of 2022, according to Meta.
Meta is undertaking a rigorous cost-cutting campaign aimed at shedding 21,000 jobs and streamlining its middle-management structure, in line with CEO Mark Zuckerberg’s target to make 2023 the “year of efficiency”.
The company’s first-quarter financial results indicated that this austerity drive had begun well, according to Debra Aho Williamson, principal analyst at Insider Intelligence. She praised the 3% year-over-year revenue growth as an accomplishment, given the current economic climate and the difficulties the company faced in 2022.
Williamson also noted that Meta’s positive Q2 revenue forecast indicates the company may be on the road to recovery. In 2022, Meta experienced setbacks due to the pandemic, TikTok’s growth in popularity, and Apple’s privacy updates that limited access to the user data on which the company built its ads business.
The company’s spending on AI technology has led to a rise in its capital expenditures, which amounted to $7.1 billion for the quarter and were slightly below analysts’ expectations.
Despite this, Meta has left open the possibility of increasing its capital expenditures as it develops generative AI products. However, CEO Mark Zuckerberg is aware of the need to control costs and balance investments in untested areas to avoid upsetting investors.
The company expects operating losses in its Reality Labs unit to increase in 2023, as it has been investing heavily in this area. Nevertheless, Zuckerberg is committed to these investments.
Meta Credits AI for Boosting Digital Ad Sales
According to Mark Zuckerberg, Meta is not shifting its focus away from the metaverse vision. In fact, the company has been focusing on both AI and the metaverse for years and will continue to do so.
Meta has revised its annual expense forecast to $86 billion to $90 billion, which is lower than the $86 billion to $92 billion it predicted in March when it announced its second round of layoffs.
The company expects revenue between $29.5 billion and $32 billion for the current quarter, beating Refinitiv’s estimate of $29.53 billion.
Although net profit for the first quarter decreased from $2.72 to $2.20 per share, it still exceeded expectations of $2.03 per share. Revenue for the first quarter increased 3% to $28.65 billion, surpassing the estimated $27.66 billion.
The impact of Meta’s strong financial results and cost-cutting measures may have a number of implications. Firstly, the surge in Meta’s share price following the release of its financial results may boost investor confidence in the company, and in the tech sector more broadly.
Secondly, the cost-cutting measures and focus on efficiency may help to streamline Meta’s operations and boost profitability, which could help the company to continue to invest in AI and other emerging technologies.
The layoffs and cost-cutting measures may also have negative impacts on the employees affected, as well as on Meta’s broader workforce morale and reputation. Additionally, it remains to be seen how successful Meta’s investments in AI and the metaverse will ultimately be, and whether they will be enough to sustain the company’s growth over the long-term.
To sum up, Mark Zuckerberg, the CEO of Meta, has stressed the significance of AI for the company’s future development and affirmed that they have caught up with developing their AI infrastructure. The company has executed numerous costly upgrades to enhance its primary business, which involves a substantial initiative to improve its AI capability.
