Meta Hikes AI Spending—but Strong Ad Growth Keeps Investors Onboard

Meta Platforms Inc., the parent of Facebook, raised its capital expenditure forecast for the year, signaling an aggressive push into artificial intelligence. But thanks to strong quarterly results, investors appear unfazed.

The company now expects to spend $64 billion to $72 billion on capex in 2024, up from its prior range of $60 billion to $65 billion. That’s a sharp increase from the $39 billion it spent last year. The spending surge reflects Meta’s efforts to ramp up AI infrastructure and stay competitive in a crowded tech landscape.

Investor concerns about runaway AI spending were top of mind heading into earnings season—especially amid fears of slower ad growth due to economic pressures and tariffs. But Meta’s solid performance helped offset those worries. The stock climbed 5.4% in after-hours trading Wednesday.

Meta reported first-quarter earnings per share of $6.43, beating Wall Street’s estimate of $5.23 and rising from $4.71 a year earlier. Advertising revenue hit $41.39 billion, ahead of expectations and reflecting stronger-than-anticipated growth.

“Ad growth in the quarter was much better than anticipated, especially on a constant-currency basis,” said Gil Luria, head of technology research at D.A. Davidson. He noted that the stronger revenue gives Meta more flexibility to raise its investment levels.

By contrast, Alphabet Inc. kept its capex guidance flat at $75 billion last week, highlighting a more cautious approach.

Meta defended its ramped-up spending, saying it’s necessary to meet internal demand for compute power and build out advanced AI systems. Management believes these tools will directly improve its advertising business by enhancing targeting and boosting conversion rates.

Although the company flagged some softness in Asia-based ad spending tied to tariff concerns, it said overall trends for Q2 are healthy. Meta guided for revenue of $42.5 billion to $45.5 billion, with the midpoint above analyst estimates.

To further bolster ad revenue, Meta is expanding placements into new products like Threads and WhatsApp, while continuing to use AI to help advertisers improve performance.