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Target exceeds second-quarter expectations, but warns of ‘significant’ expansion of capital expenditure in 2025
Facebook and Instagram parent Meta (GOAL) reported his second quarter earnings after the bell on Wednesday, beating Wall Street expectations on both the top and bottom lines. But the company warned it expects to see “significant” growth in capital expenditures in 2025.
“While we do not intend to provide any quantitative guidance for 2025 until the fourth-quarter call, we expect infrastructure costs to be a significant driver of expense growth next year as we recognize depreciation and operating costs associated with expanding our infrastructure,” CFO Susan Li said in a statement.
AI spending is a key measure for Wall Street as investors eagerly await a return on Big Tech’s investments in the technology. During the previous quarter, Li raised the company’s total annual spending estimate from $94 billion and $99 billion to between $96 billion and $99 billion.
In the second quarter, Meta saw earnings per share (EPS) of $5.16 on revenue of $39.07 billion. Analysts were expecting EPS of $4.74 on revenue of $38.3 billion, according to estimates compiled by Bloomberg. Meta posted EPS of $2.98 on revenue of $31.9 billion during the same period last year.
The company’s Family of Apps revenue, which includes revenue from Facebook, Instagram, WhatsApp and Messenger, came in at $38.72 billion, above estimates of $37.7 billion. Target saw revenue of $31.7 billion from the segment in Q2 last year.
Meta shares rose more than 4% after the report.
Meta CEO Mark Zuckerberg during an appearance at SIGGRAPH 2024 in Denver, Colorado (AP Photo/David Zalubowski) (ASSOCIATED PRESS)
Beyond advertising revenue, Wall Street is still trying to determine how long Meta will need to invest in AI before it sees any kind of financial return.
Last week, CEO Mark Zuckerberg announced Meta’s latest open-source large language model (LLM), called Llama 3.1. Additionally, the Facebook founder said that the industry should focus on open-source AI instead of closed-source models like OpenAI’s ChatGPT.
Meta’s Reality Labs segment, which includes its mixed reality hardware and software, saw revenue of $353 million in the quarter, versus expectations of $376 million. That’s better than what the company reported in the same quarter last year, but the segment continues to bleed money.
In Q2, Meta reported that the segment lost about $4.49 billion, slightly below expectations of $4.53 billion. It lost $3.8 billion in Q1. The division has also been plagued by turnover and a lack of clear vision, adding to Reality Labs’ woes, Yahoo Finance’s Yasmin Khorram reported.
Meta’s announcement also comes after Texas Attorney General Ken Paxton announced Tuesday that he had secured a $1.4 billion settlement between the state and Meta over the company’s alleged use of Texans’ biometric data without their permission for its tag suggestions feature.
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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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