Meta has told investors generative AI won't bring it revenue this year, but that the massive investments it's planning will pay off over time – and be configured so they're not tied to training workloads.
Speaking on the former Facebook's Q2 earnings call, founder Mark Zuckerberg explained Meta is "planning for the compute clusters and data we'll need for the next several years" and assumes that building its next model – Llama 4 – will likely need an "amount of compute … almost 10x more than what we used to train Llama 3." The latter model is believed to have required 16,000 GPUs. Zuck enthused that Meta aims for Llama 4 "to be the most advanced [model] in the industry next year."
Also on the call, Meta noted its capex for the full year will fall between $37 and $40 billion – the lower estimate up $2 billion from previous forecasts. Investors were told to expect "significant" capex increases next year.
Financial analysts on the call wanted to know if all that spend will turn into cash.
CFO Susan Li conceded that Meta won't see any revenue from generative AI this year, and is "continuing to build our AI infrastructure with fungibility in mind, so that we can flex capacity where we think it will be put to best use."
Li explained that the kit Meta uses for generative AI model training can also be used for inferencing.
"We can also use it for ranking and recommendations by making certain modifications like adding general compute and storage," she said. She also revealed "we are employing a strategy of staging our datacenter sites, at various phases of development, which allows us to flex up to meet more demand and less lead time if needed while limiting how much spend we are committing to in the outer years."
Meta's content ranking and recommendation tools already use what Meta calls "Core AI," which Zuckerberg told investors is improving user engagement by pushing more stuff users want into their Facebook and Instagram feeds.
A recently-added unified video recommendation tool for Facebook has "already increased engagement on Facebook Reels more than our initial move from CPUs to GPUs did."
Which is welcome news for investors. Reels is Facebook's response to TikTok, which ate its lunch in the short video market. Another win Zuck mentioned was strong engagement among young adults – an audience felt to have moved on from Facebook.
- Meta to cough up $1.4B to end fight over 'unlawful' facial recognition of friends
- Meta's AI safety system defeated by the space bar
- OpenAI unveils AI search engine SearchGPT – not that you're allowed to use it yet
- Meta claims ‘world’s largest' open AI model with Llama 3.1 405B debut
Zuck also suggested AI will improve Meta's ad business.
"It used to be that advertisers came to us with a specific audience they wanted to reach, like a certain age group, geography, or interests," he said, before humblebragging "we got to the point where our ad systems could better predict who would be interested than the advertisers could themselves."
But those advertisers still write their own copy. Zuck told investors that in coming years AI will take over that chore, and then "personalize it as people see it."
"Over the long term, advertisers will basically just be able to tell us a business objective and a budget, and we're going to go do the rest for them."
Building that experience will take years, Zuckerberg predicted. So will delivering his vision of a "holographic augmented reality" – tech Zuck said he had thought would arrive before what he termed "smart AI." He’s now decided AI will come first – in part because demand for gadgets like the Ray-Ban Meta Glasses outpaces supply.
"At the end of the day, we are in the fortunate position where the strong results that we're seeing in our core products and business give us the opportunity to make deep investments for the future," Zuck assured investors.
Ten and a half billion dollars in R&D expenses for the quarter is an eloquent statement on those intentions. So was a warning that operating losses at Reality Labs – the metaverse hardware and software limb of Meta – were forecast to "increase meaningfully year-over-year due to our ongoing product development efforts and investments to further scale our ecosystem." The unit lost $4.5 billion for the quarter on $350 million revenue.
Meta can clearly cope with the losses: quarterly revenue of $39 billion and net income of $13.5 billion were year-over-year jumps of $7 billion and $5.7 billion, respectively.
Zuck also pointed to over 3.2 billion people using a Meta app every day. Threads, its X-like social media app with less Musk, is approaching 200 million active monthly users – over half the number estimated to be using the former Twitter.
Investors like what they heard: after-the-bell trading saw Meta's share price spike from around $475 to over $510. ®