- Meta’s first quarter earnings report reveals that capital spending declined by at least $5 billion.
- The report says costs are expected to rise as the company invests “aggressively” in AI.
- Meta also cited higher infrastructure and legal costs as factors behind the increase.
Meta’s first-quarter earnings report reveals the company’s AI projects are costing more than expected.
The tech giant is increasing its capital spending estimate and expects the increase to continue as it invests “aggressively” in “AI research and product development efforts.”
Spending is expected to be about $5 billion higher than the initial estimate, reaching between $35 billion and $40 billion. The initial forecast was between $30 billion and $37 billion.
Meta’s minimum estimate for total spending for full year 2024 will also be $2 billion higher than forecast.
“We expect total spending for full year 2024 to be between $96 billion and $99 billion, updated from our previous forecast of $94 billion to $99 billion due to rising construction costs. “infrastructure and justice”, the report states.
This increase does not come only from AI. This also comes from product development and legal costs.
Meta currently faces ongoing legal issues, including an antitrust lawsuit, and is being sued by 33 states who claim the tech giant is negatively impacting children’s mental health.
The company also has expects Reality Labs’ operating losses to significantly increase due to “continued product development efforts” and investments to evolve its ecosystem, according to the report.
Reality Labs is a division of Meta that focuses on human-machine products through virtual reality headsets and augmented reality glasses.
Max Willens, senior analyst at market research firm Emarketer, Business Insider’s sister company, said it was not surprising that Meta changed its forecast.
“Companies that are investing in this area, especially to the extent that Meta is investing in it, might struggle with costs in the short term,” Willens said.
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