Wednesday was a big day for the tech industry: Meta, Google, Amazon and Microsoft reported earnings at the same time in the afternoon. However, of the four, Meta was the clear loser with its shares falling more than 7% even though revenue increased 33% last quarter, according to the company. the fastest since 2021.
That’s probably because the company raised its already outrageous spending expectations for the year. Meta said capital expenditures for 2026 would be at least $10 billion more than expected and could exceed $145 billion. While emphasizing his “confidence in this investment,” CEO Mark Zuckerberg said most of this increase was due to “higher component costs, particularly the price of memory.”
The rise of AI has led to unprecedented data center construction that has limited the global supply of memory chips and increased prices for these valuable chips. The result has been a global memory crisis That has impacted not only Meta and the rest of the AI industry, but has also caused prices for consumer electronics like laptops and smartphones to rise. soar.
Meta’s $145 billion is a dramatic increase from the $72 billion in capital spending it posted just last year, and Zuckerberg is betting everything on an AI turnaround effort.
Meta has fallen behind in the AI race as industry rivals like Google They have flown by. About 10 months ago, Zuckerberg acknowledged the situation and announced a major turnaround effort that saw him commit billions of dollars to research and development and recruit talent from across the industry, including hiring Scale AI founder Alexandr Wang to lead Meta Superintelligence Labs’ new AI division.
Many have been reasonably nervous about this commitment, considering that the company’s last big bet on emerging technology, the Metaverse, has failed dramatically. In Wednesday’s earnings report, Meta said the Reality Labs division, which had led Metaverse’s efforts, posted an operating loss of more than $4 billion, while it only made $402 million in sales. That’s on top of the whopping $80 billion and more the division has lost over the past six years.
But experts are a little more hopeful about the bet on AI because, earlier this month, the tech giant presented the first fruits of that investment with the Muse Spark AI model, a proprietary model that the company plans to open in the future. It’s a step in the right direction, but Meta still has more to do before it can confidently say that the catch-up effort has been successful.
“This was the first launch of Meta Superintelligence Labs and shows that our work is on track to build a leading lab,” Zuckerberg told investors on the company’s earnings call. “Now that we have a solid model, we can also develop newer products.”
Those new products will include two agents, one for personal use and one for commercial use, according to Zuckerberg.
“We’re already testing an early version of enterprise AI and weekly conversations have increased 10-fold since the beginning of this year,” Zuckerberg said.
One way AI is clearly showing up to benefit Meta is internally. Meta CFO Susan Li said more than 500 million weekly users on Facebook and Instagram now watch videos translated and dubbed by AI. The company is also incorporating the new AI model into parts of its core business, such as ads, and particularly its recommendation system. The goal is for AI to hyper-personalize feeds for users.
“Because our recommendation systems operate at such a large scale, we will incorporate this new research and technology over time,” Zuckerberg said. “But the trend of the last few years seems clear: We’re seeing an increasing return on how much we can improve engagement for people and value for advertisers.”
AI is also taking over internal control of Meta. The company is laying off 10% of your staff and reportedly offering voluntary buyouts to 7% of its US staff, in what appears to continue a trend supposedly driven by AI that has taken Silicon Valley by storm.
On the call, executives did not say whether the layoffs had to do with job automation, but Li did say that a “more efficient operating model” would help “offset the significant investments we are making.”
