Meta delivered strong third-quarter earnings on Wednesday, October 30, 2024, exceeding revenue and profit expectations while signaling aggressive AI infrastructure investments that will continue escalating through 2025. The social media giant reported quarterly revenue of $40.59 billion, surpassing analyst estimates of $40.25 billion, with earnings per share reaching $6.06 versus the expected $5.25.
CEO Mark Zuckerberg emphasized that AI progress drove the quarter’s success, stating “We had a good quarter driven by AI progress across our apps and business.” The company highlighted strong momentum with Meta AI, its Llama AI models, and AI-powered smart glasses. Meta’s advertising business showed robust performance with average price per ad increasing 11% year-over-year, while ad impressions grew 7%.
However, user growth slightly missed expectations, with daily active users reaching 3.29 billion—a 5% year-over-year increase but below the anticipated 3.31 billion. This metric concerned analysts as it suggests Meta will need to extract more revenue from existing users as growth slows.
The company’s aggressive AI investment strategy dominated the earnings discussion. Meta announced it expects “significant capital expenditures growth in 2025” with “a significant acceleration in infrastructure expense growth” as it expands its AI infrastructure fleet. Zuckerberg revealed that Llama 4, the company’s next-generation AI model expected in 2025, is being trained on a cluster larger than 100,000 H100 chips—apparently exceeding Elon Musk’s xAI datacenter capabilities.
Zuckerberg defended the escalating costs, acknowledging it’s “maybe not what investors want to hear” but emphasized the company is building infrastructure faster than initially planned. The CEO called this “the most dynamic moment I’ve seen in our industry” and expressed optimism about Meta’s execution on AI opportunities.
Meta’s Reality Labs division, responsible for AR, VR, and metaverse products, continues bleeding money, with the company expecting losses to “increase meaningfully year-over-year” in 2024. The division has lost approximately $50 billion over the past five years. When asked if Meta was approaching “peak” Reality Labs losses, CFO Susan Li avoided a direct answer but affirmed it remains “one of our strategic long-term priorities.”
The company’s headcount grew 9% year-over-year, primarily in infrastructure, Reality Labs, generative AI, and compliance areas—this after laying off more than 20,000 employees since late 2022. Meta’s stock dropped more than 3% in after-hours trading following the earnings call, reflecting investor concerns about mounting AI expenses despite strong revenue performance.
Key Quotes
We had a good quarter driven by AI progress across our apps and business. We also have strong momentum with Meta AI, Llama adoption, and AI-powered glasses.
Meta CEO Mark Zuckerberg opened the earnings discussion by attributing the company’s strong quarterly performance directly to AI advancements, signaling that AI has become central to Meta’s business strategy across multiple product lines.
This might be the most dynamic moment I’ve seen in our industry.
Zuckerberg made this statement during the analyst call when discussing Meta’s AI investment strategy, emphasizing the transformative nature of current AI developments and justifying the company’s aggressive spending approach despite investor concerns.
We continue to expect significant capital expenditures growth in 2025… a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet.
This official company guidance signals that Meta’s AI spending will not only continue but accelerate dramatically in 2025, setting expectations for sustained high costs as the company builds out massive AI training infrastructure.
The beat in Meta’s Q3 revenue and strong Q4 guidance mean investors should remain willing to look past its spending on AI and other initiatives. The miss in its user metric, daily active people, is concerning, as Meta will need to squeeze more revenue out of its existing users as growth slows.
Emarketer principal analyst Jasmine Enberg provided this external perspective, highlighting the tension between Meta’s strong financial performance and concerning user growth trends, while noting that AI tools may help Meta monetize existing users more effectively.
Our Take
Meta’s earnings reveal a critical inflection point in the AI industry where companies are making massive infrastructure bets that dwarf previous technology investments. The decision to train Llama 4 on a cluster exceeding 100,000 H100 chips—each costing tens of thousands of dollars—represents billions in capital expenditure for a single AI model. This scale of investment fundamentally changes the competitive dynamics of AI development, potentially creating barriers to entry that only the largest tech companies can overcome.
What’s particularly notable is Zuckerberg’s willingness to explicitly acknowledge investor concerns while doubling down on AI spending anyway. This suggests Meta’s leadership views AI infrastructure as existential—not optional—for maintaining competitive position. The company’s open-source strategy with Llama models, combined with massive proprietary infrastructure investment, represents a hybrid approach that could reshape how AI capabilities are distributed across the industry. The user growth miss, however, adds urgency to Meta’s need to demonstrate concrete ROI from AI investments beyond just infrastructure buildout.
Why This Matters
Meta’s earnings reveal the massive financial commitment Big Tech companies are making to dominate the AI landscape, with implications extending far beyond one company’s quarterly results. The revelation that Meta is training Llama 4 on a cluster exceeding 100,000 advanced AI chips demonstrates an unprecedented arms race in AI infrastructure, with companies willing to accept short-term profit pressure for long-term AI positioning.
This aggressive spending pattern signals that AI development costs are escalating faster than initially projected, potentially reshaping investor expectations across the entire technology sector. Meta’s willingness to continue increasing AI expenditures despite investor concerns suggests company leadership believes the competitive risks of underinvesting outweigh near-term financial pressures.
The integration of AI across Meta’s advertising platform—driving both engagement and ad effectiveness—provides concrete evidence of AI’s monetization potential in digital advertising, the industry’s primary revenue model. However, the user growth miss highlights a critical challenge: as user acquisition slows, companies must rely increasingly on AI-driven engagement and monetization to sustain growth. This dynamic will likely accelerate AI adoption across social media and digital platforms, fundamentally transforming how these businesses operate and compete in the coming years.
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