Meta

Meta beats earnings estimates but warns of rising AI expenses

Meta Platforms exceeded third-quarter profit and revenue estimates, reporting a profit of $6.03 per share, compared to the projected $5.25. Revenue reached $40.59 billion, just ahead of analysts’ forecasts. However, the company warned of increased infrastructure expenses tied to its AI ambitions, prompting a 2.9% dip in after-hours trading.

The company is navigating heavy spending on AI infrastructure to support new technologies, setting it apart from cloud service providers who typically profit more directly from similar investments. Meta’s expenses for the quarter totalled $23.2 billion, with capital expenditure at $9.2 billion. While it adjusted its annual expense forecast to $96-98 billion, it foresees a rise in depreciation and operating costs due to its expanding data centre fleet.

Meta’s core ad business remains essential to covering its AI investments, and analysts believe holiday ad spending could bolster the company’s earnings further. In the third quarter, Meta’s daily active users across its app family grew 5% to 3.29 billion, while its Reality Labs division saw losses of $4.4 billion, slightly better than expected.

Big Tech boosts AI investments amid Wall Street pressure

Big technology firms, including Microsoft and Meta, are significantly increasing their investments in AI data centres to meet soaring demand, but Wall Street is looking for quicker returns on these expenditures. Both companies reported rising capital expenses due to their AI initiatives, with Alphabet also indicating that its costs would remain elevated. Amazon is expected to follow suit in its upcoming earnings report.

This surge in capital spending could impact profit margins, causing concern among investors. Shares of major tech companies, including Meta and Microsoft, fell by around 4% in premarket trading, despite reporting better-than-expected profits for the July-September quarter. Analysts warn that while the race to build AI capacity is intensifying, it will take time for these investments to yield returns.

Microsoft’s capital expenditures for a single quarter now surpass its total annual spending from prior years. The company noted a 5.3% increase in spending, amounting to $20 billion, while also predicting further increases related to AI. However, they warned of potential slowdowns in growth for their Azure cloud business due to data centre capacity constraints. Similarly, Meta anticipates a “significant acceleration” in AI infrastructure costs next year.

The tech industry is experiencing bottlenecks, particularly as chipmakers like Nvidia struggle to keep up with the demand for AI chips. Advanced Micro Devices has also reported that AI chip demand is outpacing supply, limiting growth potential. Despite these challenges, both Microsoft and Meta maintain that it is still early in the AI cycle and emphasise the long-term benefits of their investments, echoing earlier experiences during the development of cloud technology.

Google faces new challenge as Meta builds AI search tool

Meta is working on a new AI search engine to lessen its reliance on Google and Microsoft’s Bing. The move places Meta among other tech giants, such as OpenAI, Google, and Microsoft, in the race to dominate the evolving AI-powered search landscape.

The new search tool aims to enhance Meta’s chatbot on WhatsApp, Instagram, and Facebook by offering conversational responses to real-time queries about news and events. Meta currently depends on Google and Bing to provide users with information on topics like news, stock markets, and sports.

As competition intensifies, Google is pushing its Gemini AI model into core services, including Search, to offer more interactive and intuitive experiences. OpenAI, meanwhile, continues to use Bing, leveraging its close partnership with Microsoft for topical queries.

The use of web data to train AI systems and build search engines has sparked debates about copyright and fair compensation. Meta recently announced that its chatbot would incorporate Reuters content to provide up-to-date answers to questions related to news and current events.

Meta opposes Malaysia’s new social media licensing requirements

Meta Platforms has expressed concerns over Malaysia’s plan to require social media platforms to obtain regulatory licenses by 1 January 2025. The Malaysian government’s new regulation aims to combat online threats like scams, cyberbullying, and sexual crimes. However, Meta’s director of public policy for Southeast Asia, Rafael Frankel, criticised the timeline, arguing it’s ‘exceptionally accelerated’ and lacks clear guidelines, potentially hindering digital innovation and economic growth.

Malaysia announced in July that any social media or messaging service with over eight million users would need to comply or face legal repercussions. The policy has sparked backlash from industry groups, including Meta, which asked the government in August to reconsider. Communications Minister Fahmi Fadzil reiterated that tech companies must align with local laws to continue operating in Malaysia, signalling no plans for delay.

Frankel emphasised that Meta has yet to decide whether to apply for the license due to the vague regulatory framework, pointing out that similar regulations typically take years to finalise to avoid stifling innovation. While Malaysia’s communications ministry has yet to comment, Fahmi recently met with Meta representatives, thanking them for their cooperation but urging more action against harmful content, particularly regarding minors.

Meta has stated its shared commitment to online safety and is collaborating with Malaysian authorities to remove harmful content. Frankel argued that Meta already prioritises online safety and doesn’t require a licensing framework. Despite ongoing concerns, Meta hopes to work with the government to find a middle ground on the regulations before implementation.

Why does it matter?

Malaysia’s strict stance on harmful online content comes in response to a rise in social media-related issues. The government has been vocal about requiring platforms like Meta and TikTok to intensify content monitoring, especially around gambling, scams, child protection, cyberbullying, and sensitive topics related to race, religion, and royalty.

NotebookLlama offers open podcast feature from Meta

Meta has launched NotebookLlama, an ‘open’ version of Google’s NotebookLM generate-a-podcast tool, but using Meta’s Llama AI models. NotebookLlama processes uploaded text files, such as PDFs or blog posts, creating a podcast-style summary with dramatisation and interruptions, followed by conversion to speech through open text-to-speech models. However, early feedback highlights a robotic, less natural sound, with voices sometimes overlapping awkwardly.

Meta’s researchers acknowledge the audio limitations and suggest that quality could improve with better text-to-speech models. They also propose evolving the format to feature two AI agents debating topics rather than a single model handling the outline.

Despite various efforts to replicate NotebookLM’s podcast capabilities, all still struggle with AI ‘hallucinations,’ making the generated content prone to inaccuracies.

Brazil’s Collective Defense Institute sues Meta, TikTok, Kwai over youth safety

The consumer rights organisation, Brazil’s Collective Defense Institute, has launched two lawsuits against the Brazilian divisions of TikTok, Kwai, and Meta Platforms, seeking damages of 3 billion reais ($525 million). The lawsuits accuse these companies of neglecting to implement adequate protections to prevent young users from excessive social media use, which could harm children’s mental health.

The lawsuits highlight a growing debate over social media regulation in Brazil, especially after a high-profile legal dispute between Elon Musk’s X platform and a Brazilian Supreme Court justice led to significant fines. The consumer rights group is pushing for these platforms to establish clear data protection protocols and issue stronger warnings about the risks of social media addiction for minors.

Based on research into the effects of unregulated social media usage, particularly among teenagers, the lawsuits argue for urgent changes. Attorney Lillian Salgado, representing the plaintiffs, stressed the need for Brazil to adopt safety measures similar to those used in developed countries, including modifying algorithms, managing user data for those under 18, and enhancing account oversight for minors.

In response, Meta stated it has prioritised youth safety for over a decade, creating over 50 tools to protect teens. Meta also announced that a new ‘Teen Account’ feature on Instagram will soon launch in Brazil, automatically limiting what teenagers see and controlling who can contact them. TikTok said it had not received notice of the case, while Kwai emphasised that user safety, particularly for minors, is a primary focus.

Meta partners with Reuters for AI news content

Meta Platforms announced a new partnership with Reuters on Friday, allowing its AI chatbot to give users real-time answers about news and current events using Reuters content. The agreement marks Meta’s return to licensed news distribution after scaling back on news content due to ongoing disputes over misinformation and revenue sharing with regulators and publishers. The financial specifics of the deal remain undisclosed, as Meta and Reuters-parent Thomson Reuters have chosen to keep the terms confidential.

Meta’s AI chatbot, available on platforms like Facebook, WhatsApp, and Instagram, will now offer users summaries and links to Reuters articles when they ask news-related questions. Although Meta hasn’t clarified if Reuters content will be used to train its language models further, the company assures that Reuters will be compensated under a multi-year agreement, as reported by Axios.

Reuters, known for its fact-based journalism, confirmed its licensed content to multiple tech providers for AI usage without detailing specific deals.

Why does it matter?

The partnership reflects a growing trend in tech, with companies like OpenAI and Perplexity also forming agreements with media outlets to enhance their AI responses with verified information from trusted news sources. Reuters has already collaborated with Meta on fact-checking initiatives, a partnership that began in 2020. This latest agreement aims to improve the reliability of Meta AI’s responses to real-time questions, potentially addressing ongoing concerns around misinformation and helping to balance the distribution of accurate, trustworthy news on social media platforms.

Meta prevails in shareholder child safety lawsuit

Meta Platforms and its CEO, Mark Zuckerberg, successfully defended against a lawsuit claiming the company misled shareholders about child safety on Facebook and Instagram. A US federal judge dismissed the case on Tuesday.

Judge Charles Breyer ruled that the plaintiff, Matt Eisner, failed to demonstrate that shareholders experienced financial harm due to Meta’s disclosures. He stated that federal law does not require companies to reveal all decisions regarding child safety measures or focus on their shortcomings.

Eisner had sought to delay Meta’s 2024 annual meeting and void its election results unless the company revised its proxy statement. However, the judge emphasised that many of Meta’s commitments in its proxy materials were aspirational and not legally binding. His dismissal, issued with prejudice, prevents Eisner from filing the same case again.

Meta still faces legal challenges from state attorneys general and hundreds of lawsuits from children, parents, and schools, accusing the company of fostering social media addiction. Other platforms, such as TikTok and Snapchat, also confront similar legal actions.

Meta launches new AI model for evaluating AI systems

Meta has released new AI models, including a tool called the Self-Taught Evaluator, which aims to reduce human involvement in the AI development process. The company’s latest batch of models is part of its ongoing efforts to enhance AI accuracy and efficiency across complex fields.

The new tool uses a ‘chain of thought’ technique, similar to one employed by OpenAI, breaking problems into logical steps for improved accuracy in science, coding, and mathematics. Meta trained the evaluator solely with AI-generated data, eliminating the need for human input at that stage.

The ability for AI to reliably assess other AI models could eventually replace costly processes such as Reinforcement Learning from Human Feedback. Meta researchers suggest that self-improving AI systems might perform better than human evaluators, marking progress toward autonomous digital assistants capable of managing complex tasks without supervision.

Meta’s latest release also includes upgrades to its Segment Anything model, tools for faster language model responses, and datasets aimed at discovering new inorganic materials. Unlike competitors Google and Anthropic, Meta makes its models accessible for public use, setting it apart in the industry.

Meta faces legal challenge on Instagram’s impact on teenagers

Meta Platforms is facing a lawsuit in Massachusetts for allegedly designing Instagram features to exploit teenagers’ vulnerabilities, causing addiction and harming their mental health. A Suffolk County judge rejected Meta’s attempt to dismiss the case, asserting that claims under state consumer protection law remain valid.

The company argued for immunity under Section 230 of the Communications Decency Act, which shields internet firms from liability for user-generated content. However, the judge ruled that this protection does not extend to Meta’s own business conduct or misleading statements about Instagram’s safety measures.

Massachusetts Attorney General Andrea Joy Campbell emphasised that the ruling allows the state to push for accountability and meaningful changes to safeguard young users. Meta expressed disagreement, maintaining that its efforts demonstrate a commitment to supporting young people.

The lawsuit highlights internal data suggesting Instagram’s addictive design, driven by features like push notifications and endless scrolling. It also claims Meta executives, including CEO Mark Zuckerberg, dismissed concerns raised by research indicating the need for changes to improve teenage users’ well-being.