What Google, Meta and Microsoft Numbers Revealed

Mark Zuckerberg is doubling down on AI—again. And the cost is mounting. Meta Platforms reported Wednesday that its increased investment in AI, both for hiring star AI researchers and for investing billions in data centers, hurt its operating profit margins and squeezed its free cash flow by one-third in the third quarter. Since the end of last year, Meta’s cash balance has fallen 43%. And yet Zuckerberg said Wednesday evening Meta plans to ratchet up spending even more next year to meet persistent internal demand for more AI computing capacity to develop its own AI products. “I think that it’s the right strategy to aggressively front-load building capacity so that…we’re prepared for the most optimistic cases,” he told analysts.

Meta stock fell roughly 8% in after-hours trading, suggesting investors are getting nervous about the company’s spending spree. The tone of its report was also a contrast to the September-quarter reports from Google and Microsoft, also out on Wednesday. Those companies—each significantly bigger in revenue terms than Meta—appear to be handling similarly large and increasing AI investments more comfortably. Unlike Meta, both have public cloud businesses that rent AI-powered servers to businesses, particularly AI developers. Both companies say the increases in their investments for capital expenditures are driven by increased demand from customers, whereas Meta’s investments are driven by the company’s own needs. Meta’s return on its AI investment is, in the near term at least, likely to be lower.