Facebook, Instagram and WhatsApp's parent company, Meta, announced on Wednesday that it is making substantial progress in its AI initiatives, which have resulted in increased traffic to both social media platforms and boosted ad sales. Mark Zuckerberg, the CEO of Facebook, said that AI is a key driver of the company's prospects for the quarter, which is significantly higher than analyst expectations.
This continues the recent rally in tech shares, which began on Friday after strong results were posted by Google parent Alphabet and Microsoft earlier this week.
Meta has been slow to adopt AI-friendly hardware and software systems for its main business, yet the company has undergone numerous costly changes to enhance its core business. The tech company has increased its AI capabilities, and Zuckerberg said that the company now has the ability to do leading work in this space at scale. AI recommendations have resulted in a 24 percent increase in time spent on Instagram during the January-March quarter, Meta said.
The analysts say that Meta's AI investments have mainly gone into the advertiser side, which is not visible to consumers, but advanced algorithms help maintain a certain level of ad targeting. Meta's cost-cutting efforts aim to streamline its operations by reducing 21,000 jobs and flattening its middle-management hierarchy. The move is part of the company's efforts to achieve its goal of establishing the year of efficiency in 2023, as envisioned by Zuckerberg.
With the investment in AI, Meta has significantly increased the company's capital expenditures, averaging $7.1 billion in the quarter, falling below analysts' expectations. Meta has not been ruled out of the possibility of increasing its capital expenditures as it creates products for generative AI that can produce human-like writing, art, and other content. Experts suggest that Mark Zuckerberg is aware of the scrutiny surrounding the company's spending habits, and may face opposition if he tries to shift the budget to untested areas.
The company has managed to invest billions of dollars in its metaverse-oriented Reality Labs unit, which lost $13.7 billion last year. Zuckerberg said he remains committed to the investments and expects operating losses in the unit to increase in 2023. Meta has revised its projected annual expenses forecasting a range of $86 billion to $90 billion, lower than the previously predicted range of $86 billion to $92 billion announced in March when the company announced its second round of layoffs.
Instagram has redesigned Reels with new video editing and discovery features.
Europe has set up a task force on ChatGPT to create a common policy on AI privacy.