Meta Raises Capital Expenditure Forecast Amid AI Expansion

Meta Platforms significantly increased its capital expenditure forecast for 2025 to between $64 billion and $72 billion, up from its previous guidance of $60 billion to $65 billion, as the social media giant accelerates investments in artificial intelligence infrastructure. The revised outlook, announced alongside Wednesday’s first quarter earnings that exceeded analyst expectations, reflects Meta’s strategic commitment to AI development despite continued losses in its Reality Labs division.

“A portion of that spend has been redirected to other markets, but overall spend for those advertisers is below the levels prior to April,” said Susan Li, Meta’s Chief Financial Officer, during the earnings call, referencing both the capital expenditure increase and shifts in advertising patterns from Asian markets. The substantial increase in planned infrastructure spending comes as Meta reported first-quarter revenue of $42.31 billion, a 16% year-over-year increase that surpassed analyst expectations of $41.38 billion, with earnings per share reaching $6.43, significantly outperforming the projected $5.22.

AI Infrastructure Investments Accelerate

Meta’s increased capital expenditure forecast positions the company to compete more aggressively in the artificial intelligence space, where major tech companies are racing to build computational capacity. The revised spending plan of up to $72 billion for 2025 represents a substantial commitment to developing AI capabilities and the supporting infrastructure necessary to deliver them at scale across Meta’s family of apps and services.

“Our business is also performing very well, and I think we’re well positioned to navigate the macroeconomic uncertainty,” CEO Mark Zuckerberg told analysts during Wednesday’s earnings call, highlighting the company’s focus on balancing current performance with future-oriented investments. The spending increase specifically targets “an increase in the expected cost of infrastructure hardware,” suggesting Meta may be securing additional AI-specific computing components amid industry-wide competition for these resources.

Reality Labs Losses Continue But Narrow

Meta’s Reality Labs division, which encompasses the company’s metaverse initiatives and virtual/augmented reality hardware development, reported an operating loss of $4.21 billion for the quarter. While this represents a significant drag on overall profitability, the loss was actually less than the $4.6 billion that Wall Street analysts had projected according to CNBC.

Revenue for Reality Labs came in at $412 million, which was down 6% from a year ago and below analyst expectations of $492.7 million. This continuing pattern of substantial investment with limited near-term returns reflects Zuckerberg’s long-term vision for immersive computing platforms, despite skepticism from some investors and analysts about the timeline for potential profitability in this segment.

Advertising Resilience Despite Regional Challenges

Meta’s core advertising business demonstrated remarkable resilience in the quarter, with advertising revenue reaching $41.39 billion versus expectations of $40.5 billion as reported by Yahoo Finance. This strong performance comes despite increasing concerns about potential headwinds in digital advertising markets, particularly from Asian e-commerce exporters affected by trade tensions.

The company reported that average ad prices increased by 10% year-over-year in the quarter, suggesting strong advertiser demand and improved ad effectiveness. This pricing strength helped offset potential volume challenges in certain regions, demonstrating the value advertisers continue to see in Meta’s platforms despite increased competition and regulatory scrutiny.

User Engagement Metrics Remain Strong

Meta reported that daily active users across its family of apps reached 3.43 billion in the first quarter, exceeding analyst estimates of 3.39 billion and representing growth from 3.35 billion in the previous quarter. This continued user engagement growth across Facebook, Instagram, WhatsApp, and Messenger provides the foundation for Meta’s advertising business and future AI-powered services.

Threads, Meta’s microblogging platform, now has 350 million monthly users, up from 320 million in January. While the company has begun allowing advertisers to run ads on the platform, executives cautioned that Threads advertising is not expected to meaningfully contribute to revenue growth in 2025. Additionally, Meta AI has reached nearly 1 billion monthly active users, demonstrating rapid adoption of the company’s AI assistant across its platforms.

Macroeconomic Uncertainty and Regional Headwinds

Meta acknowledged potential challenges in its advertising business from shifting macroeconomic conditions, particularly related to Asian e-commerce exporters who have reportedly reduced ad spending. “Meta has begun to see some reduced ad spend from Asia e-commerce exporters,” Li noted during the earnings call, though this was offset by strength in other regions.

These regional headwinds align with concerns expressed by other digital advertising companies, including Google and Snap, about potential market softness. “Jefferies noted that over 10% of Meta’s ad revenue comes from China-based advertisers, who have reportedly pulled back on their ad spending due to rising U.S.-China trade tensions,” according to Quartz, highlighting one specific vulnerability in Meta’s otherwise robust advertising business.

Legal Challenges and Regulatory Environment

Meta’s strong financial performance comes against a backdrop of continued regulatory and legal challenges. The company is currently battling the Federal Trade Commission (FTC) in court over claims it holds an illegal monopoly in “personal social networking,” a case that could have significant implications for Meta’s business model and future acquisitions strategy.

“Meta’s earnings come as the company is battling the Federal Trade Commission (FTC) in court over claims the social media company holds an illegal monopoly over the ‘personal social networking,'” reported Yahoo Finance, highlighting the ongoing regulatory pressure facing the company despite its financial success. These legal considerations add an element of uncertainty to Meta’s outlook, even as it continues to invest heavily in future-oriented technologies.