4 Key Takeaways From Mark Zuckerberg’s Comments During Meta’s Q1 Earnings Call

After Meta Platforms (META) provided weak revenue guidance and announced plans to increase spending—news that sent the company’s shares sharply lower despite better-than-expected quarterly results—Chief Executive Officer Mark Zuckerberg joined company executives on an earnings call that focused on artificial intelligence (AI).

Zuckerberg talked about Meta’s AI investments and its AI-powered recommendation engine, as well as providing a brief update about the recently launched MetaAI and touching on the company’s support for an “open” AI ecosystem.

AI Investment Drives Increased Expenditure Guidance

Zuckerberg said that Meta sees “compelling investment opportunities” to improve its core business in the near term as well as generative AI (GenAI) and the company’s virtual reality lab in the longer term.

The company expects to “invest significantly more in infrastructure over the coming years” while “maintaining a focus on operating discipline.” The CEO said the company believes its “strong financial position will allow us to support these investments while also returning capital to shareholders through share repurchases and dividends.”

Zuckerberg noted that the company has historically seen volatility in its stock when it is “investing in scaling and new products but aren’t yet monetizing it.” He said that the company experienced a similar cycle in the early days of Reels, which now makes up around 50% of the time users spend on Instagram.

He underlined that he sees increased expenditure to invest in AI as necessary to “stay at the leading edge of this.”

The company said in its first-quarter earnings press release that it had raised its capital expenditures guidance for 2024 to between $35 billion and $40 billion, up from between $30 billion and $37 billion, due to “infrastructure investments to support our artificial intelligence (AI) roadmap.”

Meta shares had tumbled in after-hours trading Wednesday immediately following the earnings release. The declines accelerated during the earnings call, and the stock was down 15.4% at $417.60 at around 7:30 p.m. ET.

Half of Content Instagram Users See Is AI-Recommended

The CEO offered investors an update on how Meta uses its AI tech in its ranking and recommendation engines for its platforms such as Facebook and Instagram.

“About 30% of the posts on Facebook feeds are delivered by our AI recommendation system. That’s up to 2x over the last couple of years, and for the first time ever more than 50% of the content that people see on Instagram is now AI recommended,” Zuckerberg reported.

He explained that the AI recommendation system improves engagement and in turn increases the opportunity that the platform has to deliver ads and “deliver more value” to advertisers.

Meta Chief Financial Officer (CFO) Susan Lee noted that advertisers benefit from the company’s AI tech through the recommendation engine as well as the GenAI features offered in its Ad Manager. She added that the company is in the early stages of testing AI agents that businesses could use on Messenger and WhatsApp to communicate with customers.

Initial MetaAI Feedback Is ‘Very Positive’ A Week After Launch

Zuckerberg provided investors with a brief update about its new AI assistant, saying that initial feedback is “very positive.”

Meta launched MetaAI, powered by its latest AI model, Llama 3, a week ahead of earnings. The new AI assistant, which is integrated into Facebook, Instagram and WhatsApp, could help Meta better compete with Microsoft-backed (MSFT) OpenAI’s ChatGPT and Alphabet’s (GOOGL) Google Gemini chatbot.

“The initial rollout of MetaAI is going well” as “tens of millions of people have already tried it,” Zuckerberg said, adding that a lot of the feedback the company has received about the AI assistant is to expand its regional availability.

He added that the company “believe[s] that MetaAI with Llama 3 is now the most intelligent AI assistant that you can freely use.”

Meta Supports ‘Open’ Ecosystem For AI and Virtual Reality

Zuckerberg touched on the company’s push for openness in AI and virtual reality systems.

When talking about how the company is improving its AI model training, Zuckerberg noted that “some improvements will come from the open source community,” and added that “improving cost efficiency is one of the main areas that [he] expect[s] that open sourcing will help.”

Meta has been vocal in its support for an “open ecosystem” to promote safety and transparency. While promoting the open-source approach doesn’t translate to direct gains for Meta, it could help the company gain influence and better compete with leading makers of closed AI models, including Microsoft-backed OpenAI, Amazon-backed (AMZN) Anthropic, and Google parent company Alphabet.

He also said that “a similar open ecosystem approach will help [Meta] expand the virtual and mixed reality headset market over time as well.”