Meta's AI spending, Muse assistant adoption in focus for quarterly results

Reuters

Meta's huge spending on artificial intelligence (AI) and the use of its Muse personal assistant will be major topics when the company reports its third-quarter results on Wednesday. The social media company wants to show that its AI investments can help its business keep growing.

The company has launched several AI products and services for businesses. CEO Mark Zuckerberg wants to create a new way to earn money beyond advertising and help Meta compete better with OpenAI and Anthropic in the AI race.

Investors have become more confident in Meta's AI plans after the positive response to its Muse assistant, which offers paid subscriptions, and its newest AI models. At the same time, Meta is committing hundreds of billions of dollars to expanding its AI infrastructure.

"Recent AI launches have strengthened confidence in the company's AI execution," BofA Global Research analysts said. They added that their survey also points to strong demand for advertising during the quarter.

Analysts estimate that Meta's capital spending more than doubled to $41.68 billion in the September quarter, according to data from Visible Alpha.

The higher spending reduced Meta's free cash flow in the second quarter. Analysts expect the company to report that it spent $8.52 billion more in cash than it brought in during the third quarter.

Despite the higher spending, Morgan Stanley analysts raised their estimates for Meta's earnings in 2027 and 2028. They pointed to stronger advertising growth and the possibility that new AI products could bring in more money.

Wall Street expects Meta's net income to fall by about 17% to $15.44 billion, according to data collected by LSEG.

Meta is expected to report revenue of $63.42 billion, an increase of 23.8%. However, growth is expected to slow from about 28% in the previous quarter because of strong competition from Google and TikTok.

Meta's shares have risen about 7% this year, performing worse than the benchmark S&P 500 index, which has gained roughly 12%.