Meta, the tech giant known for its social media platforms, has announced that it miscalculated the cost of its AI initiatives by at least $5 billion. This revelation was made in the company’s first-quarter earnings report, which also projected a significant increase in capital expenditures.
The company’s aggressive investments in AI research and product development efforts are driving these higher costs. Additionally, increased infrastructure and legal expenses are contributing to the total expenses for 2024, which are now projected to be between $35 and $40 billion, up from the original estimate of $30 to $37 billion.
There is also an additional $2 billion increase in the minimum estimate for full-year 2024 total expenses, which are now projected to be between $96 and $99 billion. These adjustments are attributed to higher infrastructure and legal costs, as well as ongoing product development efforts.
Apart from AI, Meta is facing several legal challenges that have contributed to the increased expenses. The company is currently involved in an antitrust lawsuit and legal action from 33 states concerning children’s mental health. Additionally, significant increases in operating losses in Reality Labs are expected due to ongoing product development efforts and ecosystem scaling investments.
Max Willens, a senior analyst at market research firm Emarketer, noted that it is not surprising that Meta revised its guidance given the substantial costs associated with investing in this space. He emphasized that companies investing at Meta’s level may encounter challenges with costs in the short term.
Overall, Meta’s AI initiatives continue to drive higher costs for the company, with capital expenditures expected to increase significantly. Legal challenges faced by the company have also contributed to these increased expenses.
As investors continue to monitor Meta’s progress closely, they will need to keep an eye on how these factors impact future earnings reports and overall financial performance.
