Meta's core business is benefitting from AI analyst says

Summary

Meta shares rose after reporting a 22% increase in Q2 revenue, with advertising accounting for 98% of sales. CEO Mark Zuckerberg emphasized AI investments, expecting significant capex growth in 2025. The company's disciplined investment approach and strong core ad business were highlighted. Meta's AI initiatives, like chatbots on Instagram and Facebook, are gaining consumer interest and driving engagement. Additionally, Meta's new language models, Llama, are set to tap into enterprise markets, offering a multi-year growth opportunity.

Takeaways

• 📈 Meta's shares rose after reporting a 22% increase in second quarter revenue compared to the previous year.
• 💰 98% of Meta's sales are attributed to advertising.
• 🤖 The company is heavily investing in AI and anticipates significant growth in capital expenditures (capex) by 2025.
• 🗣️ CEO Mark Zuckerberg emphasized the importance of AI during the earnings call, highlighting its potential to revolutionize multiple aspects of the business.
• 🔍 Meta is focusing on 'fungibility', meaning they are purchasing GPUs with various use cases in mind, indicating a disciplined investment approach.
• 📊 The core advertising business is performing well, growing in the low twenties percentage-wise.
• 🧠 AI is already benefiting Meta's core business, contributing to its growth.
• 🌐 There is consumer interest in AI-driven products like the recommendation engine behind 'Reels', which encourages users to spend more time on the platform.
• 🚀 Meta AI, the chatbot, is opening up new use cases for Meta's platforms, such as trip planning, which was not previously considered.
• 💼 Meta is also looking to enter the enterprise market with new language models like 'Llama', aiming to tap into enterprise budgets.
• 💹 Investors are positive about Meta's disciplined approach to investment and their clear vision for monetization.
• 🔄 Meta is balancing investment in AI with the need to maintain a strong bottom line, a challenge that has proven difficult in the past.

Q & A

What was the percentage increase in Meta's second quarter revenue compared to the previous year?

Meta's second quarter revenue increased by 22% compared to the previous year.

What percentage of Meta's sales is attributed to advertising?

98% of Meta's sales come from advertising.

What does Meta expect regarding its capital expenditure (capex) in 2025?

Meta expects significant growth in capex in 2025.

What does CEO Mark Zuckerberg think about AI and its impact on tech stocks?

CEO Mark Zuckerberg believes AI is super exciting and is going to change many things over multiple time horizons.

What was Josh Beck's biggest takeaway from Meta's latest earnings report?

Josh Beck's biggest takeaway was Meta's disciplined investment philosophy and the positive narrative around capital expenditure.

How is Meta's core ads business performing?

Meta's core ads business is doing well, growing in the low 20s percentage.

What is the role of AI in Meta's core business?

AI is already benefiting Meta's core business by driving more time on the platform and creating a bigger advertising surface.

What new use cases for AI is Meta exploring?

Meta is exploring AI use cases like chatbots on Instagram and Facebook, and planning trips with friends, which are new conversational elements.

How does Meta plan to enter the enterprise market?

Meta plans to enter the enterprise market with its new set of language models called 'llama', aiming to tap into enterprise budgets.

What is the challenge Meta faces in balancing investment with immediate financial impact?

Meta faces the challenge of walking a tight rope between investing in multi-year opportunities and satisfying investors' expectations for immediate returns on investment.

Which other companies, besides Meta, are considered good investments in the digital advertising space?

Besides Meta, Amazon and Reddit are also considered good investments in the digital advertising space.