Meta’s META-Q shares soared 7% on Thursday after the tech firm beat quarterly revenue estimates and forecast upbeat third-quarter sales indicating that strong digital-ad spending on its social media platforms can cover the cost of its AI investments.
The Facebook parent recorded revenue of $39.1 billion for the April to June period, compared with analysts’ expectations of $38.3 billion, according to LSEG data.
Meta was “continuing to see healthy global advertising demand” and was also reaping the fruits of a multi-year project to use artificial intelligence to improve targeting, ranking and delivery systems for digital ads on its platforms, Chief Financial Officer Susan Li said on a post-earnings call.
The company is on track to gain about $85 billion in market value, based on the current share price of $508.52, if gains hold.
Shares of social media app Snap, which also relies heavily on digital advertising, rose 4% before the bell.
Meta also signalled it would continue to spend big on AI infrastructure, forecasting 2024 capital expenditure between $37 billion and $40 billion.
“GenAI will require significant infrastructure investments to train the next generation of large foundational models and Meta is getting ahead of a multi-year capacity ramp,” J.P. Morgan analysts said.
Meta’s 12-month forward price-to-earnings ratio stands at 21.1, compared with Alphabet’s 20.6 and Microsoft’s 31.
Analysts have a median price target of $550 on Meta’s shares.