Topline
Meta shares soared during premarket trading on Thursday, extending a rally from the day before after the social media titan reported strong earnings in its core ad business as CEO Mark Zuckerberg strives to soothe investor concerns over the company’s aggressive investments in artificial intelligence.
Zuckerberg is trying to convince Meta investors the company’s big bets on AI are worth it.
Key Facts
Meta shares were up more than 7.5% during premarket trading as of just after 7 a.m. EDT on Wednesday after the company exceeded analysts’ expectations in its second-quarter earnings report.
The tech giant, whose social media platforms include WhatsApp, Instagram and Facebook, said net income in the second quarter climbed 73% to $13.47 billion, and Meta shares had climbed 2.5% by market close before the earnings drop.
Meta’s Frankfurt-listed shares also rose more than 7% on Thursday.
The rally marks a turnaround from the reaction sparked by Meta’s last earnings report in April when Zuckerberg told investors to expect slower growth and big spending on the company’s AI projects.
Meta shares plummeted following the announcement and the news sparked a wider selloff across the tech sector as investors questioned whether big tech’s big bets on AI would pay off.
While Meta bumped the lower end of its range for capital expenditures to account for its AI projects, Zuckerberg said its investments in the technology were beginning to bear fruit and that the costs are outweighed by the company’s strong performance in its core advertising business.
Forbes Valuation
Zuckerberg, who cofounded and led Meta’s precursor, Facebook, is worth an estimated $166.6 billion. His fortune, a large portion of which comes from his founding stake in Facebook, has grown by $4 billion, or 2.5%, over the last 24 hours. Zuckerberg is the fifth richest person in the world, behind Larry Ellison, Bernard Arnault, Jeff Bezos and Elon Musk (who he has feuded with publicly and agreed to fight in a cage match).
Key Background
Meta has bucked the trend of other big tech companies issuing earnings reports in recent weeks as investors grow more skeptical over whether their heavy investments in AI are paying off. Shares for Microsoft and Tesla tanked following their earnings reports and shares for Google parent Alphabet also fell after its report. Analysts at UBS articulated growing concerns among investors when it doubled down on its decision to downgrade Tesla from neutral to sell over fears market hype over AI and Musk’s grandiose rhetoric for the company’s future with the technology were out of touch with reality and the ability of investments in the technology to pay off in the short term, or even at all.
What To Watch For
Amazon is due to issue its second-quarter earnings report on Thursday. The e-commerce and cloud computing giant is widely expected to reveal surging capital spending on AI, in line with Microsoft and Google. According to LSEG data, capital investments are expected to have climbed 43% to more than $16 billion in the second quarter. Most of this will be for cloud computing and generative AI infrastructure. Amazon shares were up 1.3% during premarket trading.
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