Meta shares plunged 11% on Wednesday, according to BBC News, as investors reacted negatively to CEO Mark Zuckerberg's commitment to sustained high spending on artificial intelligence (AI) projects despite falling profits.
Financial performance
In its second-quarter results, the parent company of Instagram and Facebook reported revenue growth of 28% year-over-year for the period April to June, but profit fell 14% over the same period, BBC reported. The market's reaction was sharp, wiping billions off the company's market capitalisation.
Meta revised its full-year spending guidance upward, stating it would spend $130bn (£973bn) to $145bn this year, mostly on AI projects. This compares with $125bn the company had forecast just three months ago, according to BBC.
| Metric | Previous Guidance (April) | New Guidance (July) |
|---|---|---|
| Full-year spending | $125bn (mostly AI) | $130bn–$145bn (mostly AI) |
| Q2 revenue growth | — | +28% YoY |
| Q2 profit change | — | -14% YoY |
AI investment strategy
Zuckerberg said on the earnings call that the company's AI spending was "accelerating every part of our core business," driving engagement on Instagram and Facebook and boosting the ability of smaller businesses to create advertising, according to BBC.
The increased investment comes as Meta positions itself as a leading developer of large language models and AI infrastructure. The company is developing AI agents — chatbots that act somewhat autonomously — which Zuckerberg described as "the next wave of our product line in the months and years to come."
"Soon, we'll have agents that can work 24/7 on your behalf," Zuckerberg said during the call, adding that great personal agents "need to just work out of the box."
Enterprise AI monetisation plans
For the first time, Meta will sell AI models and computer tools to other businesses. The first step, Zuckerberg said, is to make its Muse Spark AI model "easier for companies to integrate," according to BBC.
Zuckerberg stated that the company expects to "build a large business for large businesses," with more coding and product tools on the roadmap. Although the move will require Meta to flex "a different muscle than we've historically had," he said the financial opportunity was too large 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 large opportunity there and we're quite focused on that," Zuckerberg added, as reported by BBC.
This pivot represents a strategic expansion from a consumer-focused social media company into an enterprise AI provider, competing with established cloud AI platforms.
Implications for investors
The combination of declining profits and accelerating capital expenditure has clearly unsettled the market. While Zuckerberg argued that AI investment is essential to drive future growth across advertising, engagement, and new enterprise revenue streams, investors are demanding evidence that these outlays will translate into sustainable profitability. The 11% share price decline signals that the market remains unconvinced in the near term.
Meta's next milestone will be its third-quarter earnings report, where investors will scrutinise whether AI-driven advertising revenue and the early success of its enterprise AI sales can offset the mounting costs.
The company's shift toward selling AI models and agents opens a new frontier, but also raises questions about execution risk and margin implications as Meta enters a market dominated by Microsoft, Amazon, and Google.
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