Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeInvestorMeta stock falls after defending AI bets to skeptical investorsThe Facebook parent gave a disappointing quarterly revenue forecast, stepping up the pressure on Mark ZuckerbergAuthor of the article:Last updated 1 hour ago You can save this article by registering for free here. Or sign-in if you have an account.Mark Zuckerberg teased a potential business line during the earnings call, a cloud computing business where Meta would sell computing power to other companies. Photo by Drew ANGERER/AFP via Getty ImagesMeta Platforms Inc. gave a disappointing quarterly revenue forecast, stepping up pressure on chief executive Mark Zuckerberg to allay investor concerns that the company isn’t swiftly benefiting from its massive outlay on artificial intelligence. The stock fell.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorThe social media giant also reported the lowest free cash flow in years, a sign of ballooning expenses for AI bets, including data centres and smart glasses, which could amount to US$145 billion this year.Meta shares slipped more than 10 per cent to US$524.49 at the market open Thursday in New York.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try againMeta relies on its broad internet advertising business to finance these investments, but shareholders are growing increasingly antsy over Meta’s ability to bring in sales and profit at a fast enough pace. Investors balked earlier this year when Zuckerberg increased projected expenditures on AI, and many of them rue Meta’s heavy spending on virtual reality and the Metaverse, which cost tens of billions of dollars without a meaningful return. On a call with investors Wednesday, Zuckerberg offered repeated assurances that his focus on AI will ultimately pay off.“I get that this is a big investment and it’s a big bet,” Zuckerberg said. “We see the technology working. We’re happy with the trajectory of the lab. I’m excited about the products that are coming. And we believe that this is going to be a big thing.”Third-quarter revenue will be US$61 billion to US$64 billion, Meta said, with the midline of that range below the average analyst estimate of US$63.2 billion, according to data compiled by Bloomberg.Meta is spending hundreds of billions of dollars to compete against American tech rivals, including Alphabet Inc., OpenAI and Anthropic PBC, in a race to develop leading AI models and products. It is one of the tech industry’s heaviest spenders when it comes to AI data centres, just this week announcing a partnership with BlackRock Inc. on a US$14 billion complex in El Paso, Tex. It is building another data centre in rural Louisiana that is expected to cost upwards of US$250 billion.In part because it doesn’t yet have a cloud-computing business and its AI products have at times been considered less competitive than some other AI labs’ work, Meta has faced recurring investor skepticism that it will recoup this spending. Meta announced several new AI-related business lines in recent months, including a consumer chatbot subscription and a pay-to-use AI model for developers, though those are in early stages.On the call Wednesday, Zuckerberg teased another potential business line: A cloud computing business where Meta would sell computing power to other companies. The CEO said that a “substantial” amount of Meta’s computing power currently goes toward training its own AI models, a necessity for being a leading AI lab. But he also said that Meta has a “large number of offers” from companies interested in buying its computing power at a “meaningful premium” over what Meta spent to acquire it.That has created an opportunity, he added, saying that Meta must now think through the tradeoff of selling the computing power it has for a profit versus continuing to use it for its own products and services. These calculations are happening at the same time that Meta is also buying computing power from independent data-centre operators — so-called neoclouds — as well.“There is just nowhere near enough compute for all of the demand,” he added when asked about the idea of Meta being both a buyer and seller. Bloomberg earlier reported on Meta’s plans to develop a cloud computing business.Meta adjusted its full-year capital expenditure forecast to US$130 billion to US$145 billion, slightly lifting the bottom end from a previous projection of US$125 billion to US$145 billion. In one sign of the enormity of Meta’s AI investments, the company’s free cash flow in the second quarter fell to US$784 million, the lowest level since the third quarter of 2022, according to data compiled by Bloomberg.Much of its investment is fuelled by advertising that Meta runs on its flagship social networking products, Facebook and Instagram. Meta reported revenue of US$60.8 billion for the quarter ended June 30, slightly above the US$60.3 billion that analysts projected.“Meta’s strong revenue growth will once again be overshadowed by its capital expenditure projections,” wrote Minda Smiley, a senior analyst at Emarketer. “Even though Meta didn’t raise projections, that won’t stop investors from pressing for more information regarding plans for a potential computing business — and any other details on how Meta is thinking about monetizing AI.”The biggest United States tech firms plan to spend as much as US$725 billion this year on capital expenditures, mainly for AI infrastructure needed to build out data centres. Google parent Alphabet Inc. said last week it had raised its capital spending forecast to as much as US$205 billion this year, sending the stock lower. Across the board, investors have been squeamish about the companies’ AI spending, wary about where it will lead and whether it will ultimately pay off.Still, Zuckerberg projected confidence to end the company’s analyst call, predicting investors will ultimately benefit from Meta’s AI gamble.“My personal bet is that the people who invest in this are going to be rewarded and feel very good over time,” he said.Meta is facing other costs on top of its hefty AI investments. The company narrowed its full-year expense outlook Wednesday to US$165 billion to US$169 billion, a jump meant to incorporate US$2.4 billion in penalties related to legal proceedings, according to a company filing.Thousands of individuals and U.S. school districts are suing Meta and other major social media companies over allegations that their products are addictive and harmful to minors. Earlier this year, a jury found Meta and Google liable for a young woman’s mental health struggles, awarding her a total of US$6 million in damages in what was considered a litmus test for thousands of similar, pending complaints.In March, Meta lost a separate case in New Mexico alleging the company failed to protect children from online predators; jurors assessed a penalty of US$375 million, which the company continues to fight. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.