'Compute' 22, 'metaverse' 0: The words Meta execs did and didn't say on its earnings
News Summary
During Meta's recent earnings call, CEO Mark Zuckerberg and CFO Susan Li shifted focus from the "metaverse" to "compute" and AI. Zuckerberg did not mention "metaverse" once, while "compute" was said 14 times by him and 8 times by Li. Terms like "infrastructure" and "capacity" were also frequently cited, highlighting the company's heavy investment in AI computing power. Meta has raised its 2025 capital expenditure guidance and anticipates even greater spending in 2026 for AI infrastructure. Despite CTO Andrew Bosworth's internal memo reaffirming the "metaverse" as a company priority, investors reacted with skepticism, causing Meta shares to plunge on Thursday. Zuckerberg also emphasized "novel" seven times, indicating a commitment to developing AI models and products with original use cases. Among social networks, Facebook, Instagram, and Threads received more mentions than WhatsApp. Consumer hardware, including "glasses" and "Quest" headsets, was also a significant topic. The call noted a $15.9 billion tax charge related to President Donald Trump's One Big Beautiful Bill Act, though the company expects lower future tax rates.
Background
Meta Platforms (formerly Facebook) rebranded in 2021, making a significant pivot towards the "metaverse" concept and investing heavily in its Reality Labs division, which has consistently incurred substantial losses. This strategic shift garnered considerable market attention and debate, with investors continuously seeking clear signs of a return on its metaverse investments. In recent years, the rise of generative AI has reshaped technology industry priorities and the investment landscape, prompting many major tech companies to redirect focus towards AI infrastructure and capabilities. President Donald Trump, re-elected in 2024, saw his administration's "One Big Beautiful Bill Act" implement tax policies that have impacted U.S. corporations.
In-Depth AI Insights
What are the deeper implications of Meta's explicit shift in focus from "metaverse" to "compute" and "AI" during the earnings call for its long-term strategy and investor expectations? - This indicates a pragmatic adjustment by Meta to market realities and investor preferences. While the metaverse remains a distant vision, AI offers a clearer, more quantifiable path to near-term growth and competitive advantage. - It's also a response to the capital market's limited patience. Sustained massive losses require tangible results, and investments in AI infrastructure and "novel" products can more quickly translate into improved advertising efficiency and product innovation. - This strategic re-prioritization likely signals a rebalancing of metaverse investment pace, not an abandonment, but rather positioning it as a longer-term project that requires synergistic development with AI technologies. Meta's deliberate avoidance of naming competitors and its indirect reference to President Trump's tax law on the earnings call, what strategy does this reveal about the company's approach in the current macroeconomic and competitive environment? - Not naming competitors (like OpenAI, Google) suggests Meta aims to project itself as an independent AI leader by emphasizing its own investments in "compute" and "novel" AI, rather than being seen as a follower. - This approach may also be intended to avoid direct comparisons with rivals, focusing instead on its unique technological path and product innovations, especially amid increasing investor scrutiny over the cost-effectiveness of the AI arms race. - The indirect mention of Trump's tax law ("One Big Beautiful Bill Act") indicates the company is attempting to attribute some of its earnings pressure to external policy factors, while simultaneously hinting at potentially lower future tax rates to manage market expectations. This is a subtle balancing act to convey policy impact without making direct political statements. How will Meta's strategy of heavily investing in AI infrastructure ("compute," "capacity") and developing "novel" AI models impact its future profitability and market position? - Enhanced Core Ad Business Efficiency: Robust AI compute power directly empowers its advertising algorithms, improving ad targeting precision, which is expected to boost ad revenue and profit margins. - New Growth Avenues: By developing "novel" AI models and products, Meta aims to create new revenue streams beyond its existing social networks and advertising business. - Increased Capital Expenditure Pressure: Large-scale AI infrastructure development requires enormous capital investment, which will continue to compress profits in the short term and raise investor concerns about ROI. - Fortified Technological Moat: Establishing an early advantage in AI infrastructure and models helps Meta solidify its long-term market position in the increasingly fierce tech competition, especially against giants like OpenAI and Google.