As the Facebook parent company increased spending on AI infrastructure, legal fees, and hiring, Meta Platforms’ second-quarter revenue was greater than anticipated, driven by solid advertising demand. However, Wall Street earnings projections were missed by the company.
The increase in digital advertising and the growing contribution from fresh businesses drove the company’s revenue for the April-June quarter to USD 60.8 billion, up 28 percent from the previous year and surpassing analysts’ projections of USD 60.19 billion.
Expenses increased at a faster rate than revenue, leading to adjusted earnings of USD 6.18 per share, which was significantly lower than the USD 7.17 per share predicted by analysts.
After finishing the regular session at USD 585.61, Meta’s shares dropped 9.6 percent in extended trading to USD 529.15 as investors pondered the earnings miss and the company’s ongoing substantial investment in artificial intelligence.
Relative to the previous year, net income fell 14% to USD 15.85 billion, or USD 6.18 per share, down from USD 18.34 billion, or USD 7.14 per share.
Legal fees of $2.4 billion, severance costs of $1.2 billion, and increased expenditure on artificial intelligence (AI) expertise and computer infrastructure drove the overall expenditure increase of 55% to $42 billion.
Meta continues to grow its AI capacity throughout the quarter, leading to capital expenditures reaching USD 31.1 billion.
The operating margin shrank to 31% as operating income dropped 8% annually to USD 18.8 billion.
Despite sustained success in its primary advertising business, the data demonstrated that the increasing expense of Meta’s AI aspirations was outpacing revenue growth.
Image: Quartz
