Image source, Reuters Image caption, Meta CEO Mark Zuckerberg has turned the company into a major spender on AI
Meta shares plunged on Wednesday as investors balked at its promise to keep spending on artificial intelligence (AI) projects while profits dwindle.
Shares in the firm behind Instagram and Facebook fell as much as 11% in extended trading after its results for the quarter from April to June showed revenue grew 28% from a year ago to $61bn (£45.6bn), while profits fell 14% to $6bn.
Meta said it would spend $130bn to $145bn this year, mostly on AI, up from the $125bn it said it planned to spend just three months ago.
Chief executive Mark Zuckerberg said the firm's AI spending was "accelerating every part of our core business" and it plans to start selling the technology to other companies.
Susan Li, Meta's chief financial officer, told financial analysts that selling its tech to other companies would help it drive returns on its AI spending.
"By 2028, we'll have turned over a lot of cards," she said.
Such lines of business have not yet materialised. Meta's free cash flow for the quarter, what it held onto after paying for its operations, was $784m, the lowest level of the metric it has posted in at least five years, according to its financial records.
"What it generated in cash this quarter almost all got eaten by AI infrastructure spending", analyst Mike Proulx at Forrester said. "Investors now have to decide whether Meta's growing list of AI initiatives represents company diversification or distraction."
"There's a bit of similarity to Meta's metaverse missteps in that Meta is once again spending ahead of proven product demand," Proulx added, referring to the firm's previous spending of tens of billions of dollars on virtual reality experiences that fell flat with users.
Google last week also reported its lowest ever amount of leftover cash, which sent its own stock tumbling.
"I get that this is a big bet across the industry," Zuckerberg said of AI spending. "My personal bet is that the people who invest in this will feel very good and be rewarded over time."
He said on the call with analysts that Meta's AI abilities and models were driving engagement on Instagram and Facebook and boosting the ability of smaller businesses to create advertising. Zuckerberg added that the company was developing AI agents, or AI chatbots that act somewhat autonomously.
Such agents "will be the next wave of our product line in the months and years to come," Zuckerberg said.
"Soon, we'll have agents that can work 24/7 on your behalf", he added. "Great personal agents need to just work out of the box. I'm very excited about this and we will have more to share soon."
"We're the best company in the world at scaling experiences to billions of people," Zuckerberg said.
As for Meta's plans to sell AI models and computer tools to other firms for the first time, Zuckerberg said the first step is to make its Muse Spark AI model "easier for companies to integrate".
"We expect to build a large business for large businesses," he said. "We have more coding and product tools on our roadmap."
Although Zuckerberg said the move would flex "a different muscle than we've historically had", he said the financial opportunity was too big to ignore.
"It's not just about selling compute; it's the API services and the productivity services and I think there is a very, very la…