Tech Corner: META's A.I. CapEx Intensifies

Core Insights - Meta Platforms is the world's largest social media company, utilizing a two-sided platform strategy that connects users and advertisers [2][3] - The company generates over 95% of its revenue from advertising, with a significant portion coming from international markets [4] - Meta's Reality Labs segment is focused on virtual and augmented reality, alongside substantial investments in artificial intelligence to enhance user engagement and ad targeting [5] Financial Performance - In Q3, Meta added 60 million users and exceeded revenue estimates by 1.66%, reporting $66 billion in revenue [7][8] - Average revenue per user increased by 18% year-over-year, indicating strong monetization efforts [8] - Meta's capital expenditure guidance for 2025 has been raised to between $70 billion and $72 billion, reflecting aggressive investments in AI [9] Competitive Landscape - Meta faces competition from major players like YouTube, TikTok, and LinkedIn, as well as Amazon in the digital advertising space [6][7] - Other social networking competitors include X (formerly Twitter), Reddit, and Snapchat [6] Market Trends - Meta's capital intensity is projected to reach 36% in 2025, up from 24% in 2024 and 20% in 2023, indicating a significant increase in spending relative to revenue [9][10] - The company is experiencing a notable shift in stock price, with recent earnings results causing a gap down to near the $600 level [11][12] Investment Outlook - Meta's AI investments are driving revenue growth, with a reported 26% year-over-year revenue increase last quarter [18] - The challenge remains for Meta and other AI companies to effectively monetize their technology amidst high capital expenditures [18]