Meta to report Q2 earnings amid AI investment push
On Friday, CEO Mark Zuckerberg announced former OpenAI (OPAI.PVT) researcher Shengjia Zhao, who helped develop the company's ChatGPT model, has been named founder and chief scientist of Meta's Superintelligence Lab.
Prior to Zhao, Meta invested $14.3 billion in Scale AI (SCAI.PVT) and hired its CEO, Alexandr Wang. The company also hired former GitHub CEO Nat Friedman and Safe Superintelligence CEO Daniel Gross. Zuckerberg also poached Apple's (AAPL) head of AI foundation models, Ruoming Pang, according to Bloomberg.
Meta is also spending on AI data centers, with Zuckerberg saying last week that the company is investing hundreds of billions of dollars to build several multi-gigawatt data centers around the country. One such facility, called Hyperion, will eventually scale up to support up to 5 gigawatts, or 5 billion watts, of capacity.
For the quarter, analysts expect Meta to report earnings per share (EPS) of $5.89 on revenue of $44.83 billion, according to Bloomberg consensus estimates. The company saw EPS of $5.16 and revenue of $39.07 billion in the same period last year.
Advertising revenue is expected to climb 15% year over year to $44.09 billion, while Reality Labs should bring in $386 million.
Read more: Live coverage of corporate earnings
While Meta is spending truckloads of money on its AI buildout, it's also seeing some early returns on its investments.
'AI has already made us better at targeting and finding the audiences that will be interested in their product than many businesses are themselves, and that keeps improving,' Zuckerberg said during the company's Q1 earnings call.
'In just the last quarter, we're testing a new ads recommendation model for Reels, which has already increased conversion rates by 5%,' he added. 'And we're seeing 30% more advertisers are using AI creative tools in the last quarter as well.'
It's a strategy that Wall Street is taking a liking to.
'Given audience scale, we continue to see Meta as one of the best AI opportunity stocks, with potential revenue upside as AI capabilities are integrated into the ad stack,' BofA Global Research analyst Justin Post wrote in an investor note ahead of Meta's earnings.
Meta is also pushing further into the smart glasses space as another avenue to generate AI revenue. The company already offers its Ray-Ban Meta smart glasses, and in June, it unveiled its Oakley Meta glasses. The company is also working on standalone AI glasses that it will release in the future. All of this comes as Meta continues its push into what Zuckerberg calls 'personal superintelligence.'
'Our mission with the lab is to deliver personal superintelligence to everyone in the world, so that way we can put that power in every individual's hand,' he said during an interview with The Information's TITV.
'It's a different thing than what the other labs are doing. This is going to be something that is the most important technology in our lives.'
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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