Martin: Zuckerberg Buying Right to Spend Like 'Drunken Sailor'

Microsoft Corp., which set a $24.2 billion capital spending record last quarter, plans to drop upwards of $30 billion in the current period. Amazon.com Inc. similarly spent $31.4 billion last quarter, almost double what it dropped a year ago, and is maintaining that level of investment. Google owner Alphabet Inc. raised its capital expenditures guidance this year to $85 billion. Then there’s Meta Platforms Inc.: The social networking giant lifted the low end of its forecast for 2025 capital expenditures and projected that costs will continue to grow at an even faster pace next year. Altogether, the four companies are expected to spend more than $344 billion for the year, with much of it going to the data centers necessary to run AI models. Laura Martin, senior analyst at Needham & Company gives her outlook.

Meta Platforms Inc. is taking advantage of its lucrative advertising business and stepping up spending next year, with executives saying now is the time to seize on investment opportunities in artificial intelligence.

Investors cheered the plan, sending shares up as much as 12% to $779.34 after markets opened in New York on Thursday, marking a record high. The social media giant reported second-quarter earnings on Wednesday that beat Wall Street estimates and forecast better-than-expected results for the current quarter.

“We really believe that this is a time for us to really make investments in the future of AI, as I think it will open up both new opportunities for us in addition to strengthen our core business,” Chief Financial Officer Susan Li told investors during a call after the results were announced. Meta executives underscored that its evolving AI technology, which has been integrated into its ads products, is already producing “meaningful” revenue.

Meta and its big tech peers, including Alphabet Inc. and Microsoft Corp., are relying on their legacy businesses to fund their pursuits of pricey AI talent and data centers, adding billions to their spending plans with full support from Wall Street. Meta lifted the low end of its forecast for 2025 capital expenditures, while also providing early steer on 2026 spending. Meta said costs will continue to grow at an even faster pace next year — particularly as it focuses on AI infrastructure needs and the niche technical talent that can fine-tune its models.

The strategy only works for Meta if the company keeps printing money from advertising. So far, it is. Meta’s current-quarter sales are expected to be $47.5 billion to $50.5 billion, Meta said. The midpoint of that range exceeded the average analyst estimate of $46.2 billion, according to data compiled by Bloomberg.

That ads business, Chief Executive Officer Mark Zuckerberg said, is already seeing a “meaningful” amount of revenue from new generative AI features. “On advertising, the strong performance this quarter is largely thanks to AI unlocking greater efficiency and gains across our ad system,” he said.

Meta “crushed it” in the quarter, in part because AI improvements allowed the company to increase the average price of its ads, Matt Britzman, an equity analyst at Hargreaves Lansdown, said in an email. “All this spending adds some near-term risks to the bottom line, but Meta looks set to be a clear winner in the AI space over the longer term.”

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