Meta Platforms Inc. reported stronger-than-expected second-quarter sales on Wednesday, highlighting the positive impact of its investments in artificial intelligence (AI) on targeted ad sales. This progress has given CEO Mark Zuckerberg more time to validate his significant bets on both AI and the metaverse. Following the announcement, Meta’s shares surged in Thursday trading.

Zuckerberg emphasized the company’s advancements in AI, including the development of large language models and AI-powered products like smart glasses and virtual reality headsets. “There are all the jokes about how all the tech CEOs get on these earnings calls and just talk about AI the whole time,” he remarked during an investor call. “It’s because it’s actually super exciting and it’s going to change all these different things over multiple time horizons.”

Meta’s AI initiatives are enhancing ad targeting by using algorithms to better determine ad placement and timing, thus optimizing its core business. The company is also introducing generative AI tools to help small-budget marketers create more engaging promotions.

Meta’s user base grew to 3.27 billion across Facebook, Instagram, and WhatsApp as of June 30, marking a 7% increase from the previous year. This growth, coupled with strong sales figures, led to a 10% jump in Meta’s stock, adding $123 billion in market value—the stock’s biggest intraday gain since February.

For the quarter ended June 30, Meta reported sales of $39.1 billion, surpassing analysts’ expectations of $38.3 billion. The company forecasts third-quarter sales between $38.5 billion and $41 billion, aligning closely with projections.

To maintain its competitive edge in AI, Meta has significantly ramped up spending on data centers and computing power. The company adjusted its capital expenditure forecast for the year to $37 billion to $40 billion, raising the lower end by $2 billion.

Meta also launched its largest AI model to date, which required hundreds of millions of dollars in computing power to train. Despite heavy investments, the Reality Labs division, which focuses on metaverse and AI technologies, reported a loss of nearly $4.5 billion for the quarter.

Balancing long-term investments with immediate financial returns has been a challenge for Meta. While the company has taken steps to support its stock, such as job cuts and a $50 billion share buyback program, Zuckerberg has made it clear that spending on AI and related technologies will continue to rise.

Some investors are growing impatient with the substantial investments in AI infrastructure that have yet to yield significant commercial benefits. However, Zuckerberg remains confident in the long-term value of these technologies, arguing that over-investing now may be better than under-investing.

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