Meta raises spending outlook, plans non-voting shares to fund AI expansion

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Meta raises AI spending outlook

Highlights

Meta raised its 2024 capital expenditure forecast to $135 billion–$145 billion, from a previous $130 billion–$145 billion range, to intensify AI investments.
Meta reported quarterly revenue of $64.60 billion, surpassing Wall Street's $63.37 billion estimate, and provided a fourth-quarter outlook above analyst expectations.
A New Mexico judge ordered a $25 billion penalty against Meta over user data and misinformation issues, while regulatory risks and AI security concerns continue to pressure the company.

Capital plan and earnings update

As reported by Reuters, Meta said on Wednesday that it now expects capital expenditure of between $135 billion and $145 billion this year, lifting the lower end of its prior $130 billion to $145 billion range.

The Facebook and Instagram parent also reported quarterly revenue of $64.60 billion, above Wall Street estimates of $63.37 billion, according to LSEG data. Meta further said its fourth-quarter revenue forecast is above analyst expectations.

The company has been spending heavily on chips and data centers as it competes more aggressively with OpenAI and Anthropic. The planned non-voting shares could give Meta another way to fund acquisitions and attract AI talent without weakening Zuckerberg's control over voting rights.

AI push faces legal and market pressures

Meta's recent AI releases, including its consumer-focused AI agent Muse and a new series of AI models, are helping the company defend the scale of its spending to investors. Even so, some enterprises are limiting the agent's access because of security concerns.

Legal and regulatory risks are also building. Earlier on Wednesday, a judge in New Mexico ordered a $25 billion penalty after a jury found Meta misled state residents about sharing user data with third parties and about enforcement of policies on hate speech and misinformation in a case tied to Cambridge Analytica.

In August, Meta agreed to pay as much as $18 billion over a decade and restrict teenagers' use of Facebook and Instagram to settle claims by nearly all U.S. states that its platforms were designed to addict children. That settlement removed a major regulatory overhang for the stock and helped the company avoid a potentially lengthy trial.

Advertising still generates almost all of Meta's revenue. Reels continues to compete with TikTok and YouTube Shorts in short-form video, Threads is challenging X, and the company's AI tools are being used to improve ad targeting and recommendations in support of user engagement.

We previously examined the growing strain on the U.S. AI data center boom, as higher financing costs, construction delays, and power constraints cast doubt on how quickly new computing capacity can come online. That report highlighted weakening investor confidence and the risk that developers may struggle to deliver large-scale projects on time and on budget, despite still-strong demand for AI infrastructure.

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