Silke Mayr While Meta competes in the AI landscape alongside major tech companies, analysts suggest that it excels in communicating the significance of AI for its business. This clarity is contributing to Meta’s impressive revenue growth and boosting investor confidence, which has in turn driven up its stock price.
As of now, Meta has outperformed peers like Alphabet, Apple, and Microsoft, with a year-to-date stock increase of over 53%. In comparison, Alphabet’s stock has risen about 20%, Apple’s by 22%, and Microsoft’s by 12%.
In its latest quarter, Meta reported sales of $39.1 billion, surpassing analyst expectations of $38.3 billion. This contrasts with disappointing earnings reports from competitors such as Amazon, Microsoft, and Alphabet, where investors were eager to see substantial returns from multi-billion-dollar AI investments.
Analysts have noted that during a recent earnings call in July, Mark Zuckerberg effectively conveyed the advantages of AI better than his counterparts at other tech firms. The crucial link between AI and revenue for Meta lies in its advertising business, which accounted for 98% of the company’s revenue last quarter. Investment strategist Andrew Ye remarked, “[Meta] has arguably articulated its vision of AI integration more clearly than its competitors.”
Nearly all of Meta’s advertisers utilize at least one of its AI-driven ad tools. Additionally, AI-enhanced content recommendations keep users engaged longer, ultimately increasing ad revenue. “Across Facebook and Instagram, advances in AI continue to improve the quality of recommendations and drive engagement,” Zuckerberg stated during the earnings call.
Looking ahead, Zuckerberg mentioned that AI will play a pivotal role in creating personalized content for advertisers. Meta aims to streamline the advertising process, allowing advertisers to focus solely on their business goals and budget while AI manages the rest.
Zuckerberg predicts that by 2025 and 2026, AI will continue to bolster revenue by enhancing existing products, including content recommendations and advertising. “I do think that part of what’s so fundamental about AI is it’s going to end up affecting almost every product that we have in some way,” he emphasized.
However, building AI infrastructure is an expensive endeavor, with the development of a single AI model costing upwards of $100 million. Zuckerberg revealed that Meta’s largest AI model, launched in July, incurred costs in the hundreds of millions of dollars.