Meta warns of significant acceleration in costs tied to AI after strong Q3

Facebook owner Meta Platforms beat analysts’ estimates for third-quarter revenue and profit on Wednesday, but warned of “significant acceleration” in artificial intelligence-related infrastructure expenses.The results sent mixed signals to investors about whether digital ad sales from Meta’s core social media business would continue to cover the cost of its massive AI buildout.Shares of the Menlo Park, Calif.-based firm fell 2.9% in after-hours trading.“Meta needs to prove that it can continue to cover its AI costs as they rise next year, and any weakness in its core ad business could make investors nervous as they continue to wait for a return on Meta’s bigger AI bets,” said Emarketer principal analyst Jasmine Enberg.Like its Big Tech peers, Meta has invested heavily in data centers to capitalize on the generative AI boom.Unlike providers of cloud services, however, it does not expect to earn money from those investments right away and therefore is more subject to scrutiny from investors around its spending.The world’s biggest social media company, headed by CEO Mark Zuckerberg, kept costs in check in the third quarter, with total expenses of $23.2 billion and capital expenditure of $9.2 billion.

It projected a slightly improved expense picture for the year as well, narrowing its total expense forecast to $96 billion to $98 billion.In its press release, however, it warned of “a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet.”Investors have been wary of Meta’s spending in recent months.Its shares sank in April after it disclosed a higher-than-expected expense forecast, knocking $200 billion off its stock-market value.That ended a run of strong quarters for Meta, which has climbed back from a share-price meltdown in 2022 by slimming its workforce, leaning in to investor excitement about AI and earlier thi...