Meta's 1Q24 revenue soars, AI and metaverse spending surge sparks market worries

Chia-Han Lee, Taipei; Jerry Chen, DIGITIMES Asia 0

Credit: AFP

Meta has rebounded from the negative growth in 2022.

The company's Q1 2024 financial report shows revenue growth exceeding 20% for three consecutive quarters. However, the market remains skeptical due to Meta's increased spending and ongoing losses in Reality Labs.

Meta's increased spending

Bloomberg, The Wall Street Journal, and CNBC have reported Meta's CFO, Susan Li has further raised its total spending for 2024 from the original US$94 billion to US$99 billion range to a new floor of US$96 billion.

Such a move is stated in the outlook section of the company's financial statements. Furthermore, to support the development of its AI blueprint and expand related infrastructure investments, Meta has significantly increased its capital expenditure for 2024 from the original US$30 billion to US$37 billion, to US$35 billion to US$40 billion.

Confidence even in loss

With Meta's continued advancement of its metaverse vision through new product development and ecosystem expansion, the widening losses in the Reality Labs division are also expected to continue. Analysts estimate that losses for this division in Q2 2024 will grow to US$4.31 billion, surpassing the US$3.85 billion loss in Q1 2024.

Moreover, Li pointed out that with the company's outlined product and AI technology development blueprint, capital expenditures are expected to only increase after 2025. Meta recently unveiled its next-generation AI model, Llama 3, and simultaneously updated its suite of applications and Meta AI assistant on Ray-Ban's smart glasses.

Zuckerberg also emphasized to accelerate AI capabilities, increased investment is required, particularly in computational hardware. This investment is deemed crucial for competing with rivals like Microsoft and Google, although the returns may take several years to materialize.

Despite Reality Labs accumulating losses exceeding US$16 billion in 2023 and a total loss of over US$45 billion since the end of 2020, Zuckerberg believes that the achievements of the past year, especially the success of AI chatbots and Ray-Ban smart glasses, instill confidence in Meta's expansion investment.

Meta recently announced the opening of its Meta Horizon operating system to collaborate with third-party hardware vendors to develop new mixed reality (MR) devices. The expansion is expected to further strengthen its ecosystem in response to competition from Apple's Vision Pro.

Zuckerberg had previously stated at the end of 2023 that the company would focus on investing in AI infrastructure in 2024, including purchasing 350,000 H100 GPUs from Nvidia and 250,000 AI chips from other suppliers. Additionally, in January 2024, Meta announced an investment of US$800 million to build a new data center and recently released the second generation of its MTIA self-developed chip to reduce dependence on suppliers like Nvidia and customize features for its suite of applications.