Meta’s AI investments in Llama 4 set to pay off long term

Meta has informed investors that its heavy investments in generative AI won’t yield revenue this year but are expected to pay off in the long run. Founder Mark Zuckerberg explained that Meta is preparing for future computing needs, particularly its next AI model, Llama 4, which will require significantly more computing power than its predecessor. Despite the high costs, with capital expenditures projected to reach up to $40 billion this year, Meta aims to position Llama 4 as the industry’s most advanced model by next year.

CFO Susan Li acknowledged during the earnings call that generative AI would not contribute to this year’s revenue. However, she emphasised that Meta’s AI infrastructure is designed to be flexible and multifunctional, capable of supporting various AI needs, including content ranking and recommendations. Meta’s existing AI tools have already enhanced user engagement on platforms like Facebook and Instagram, and new video recommendation tools have further boosted interaction with features like Facebook Reels.

Zuckerberg also discussed AI’s potential to transform Meta’s advertising business. He predicted that AI would eventually handle tasks like writing personalised ad copy and managing campaign objectives, simplifying the process for advertisers. This vision aligns with Meta’s broader strategy of leveraging AI to improve user experience and business outcomes.

Why does this matter?

Despite significant losses in its Reality Labs division, which focuses on metaverse-related technology, Meta reported solid financial performance. The company showed robust growth with quarterly revenues of $39 billion and net income of $13.5 billion. Additionally, Meta’s daily user base reached 3.2 billion, and its new social media app, Threads, is nearing 200 million monthly active users, contributing to investor confidence and a rise in Meta’s share price.