Preview - Meta's AI spending and the adoption of the Muse assistant become the focus of the quarterly financial report

Reuters, October 20 - When Meta announces its third-quarter earnings on Wednesday, its massive investment in artificial intelligence and the rollout of its personal assistant "Muse" will be key areas of focus, as the social media company seeks to prove that its AI investments can support sustained growth.

The company META.O has already launched several AI products and services for businesses (link), with CEO Mark Zuckerberg aiming to open up new revenue streams beyond advertising in order to compete more effectively in the AI race with OpenAI and Anthropic.

• Meta's subscription-based smart assistant Muse (link) and its latest AI model (link) have both received positive responses, boosting investor confidence in the company's AI strategy. Meta has pledged to invest hundreds of billions of dollars to expand its AI infrastructure.

• "The recent launches of AI products have increased market confidence in the company’s ability to execute on AI," analysts at BofA Global Research (Bank of America Global Research) said, adding that their survey also showed robust ad demand this quarter.

• According to data from Visible Alpha, analysts estimate Meta’s capital expenditures for the September quarter more than doubled, reaching $41.68 billion.

• The increased spending has led to pressure on free cash flow in the second quarter, with analysts expecting third-quarter cash outflow to reach $8.52 billion.

• Despite higher expenditure, Morgan Stanley analysts have raised their earnings forecasts for Meta for 2027 and 2028, citing strong growth in the ad business and the potential for new AI products to generate additional revenue.

• According to data compiled by London Stock Exchange Group (LSEG), Wall Street expects Meta's net profit to drop by about 17% to $15.44 billion.

• Amid fierce competition from Google and TikTok, Meta’s revenue is expected to rise 23.8% to $63.42 billion, a slowdown from last quarter’s roughly 28% growth.

• The company’s shares have risen about 7% so far this year, underperforming the benchmark S&P 500's gain of around 12%.

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