Meta Platforms: A Look at Their Investment in AI and Revenue Growth

Meta Platforms (NASDAQ: META) is well-known for its popular social media apps, including Facebook, Messenger, WhatsApp, and Instagram, which attract a global user base.

Currently, over 3.2 billion people engage with these platforms daily, contributing to the company’s growing revenues, which now total billions of dollars. This growth has even allowed Meta to introduce a dividend this year.

However, Meta’s focus extends beyond social media. In 2024, the company is heavily investing in the dynamic field of artificial intelligence (AI).

As the AI boom accelerates, Meta has steadily increased its investments and footprint in this sector. The company developed Llama, a large language model driving its AI systems, including the recently launched Meta AI assistant.

While Meta excels in social media, its moves into AI raise a question for investors: Is the stock a good buy?

Image source: Getty Images.

Revenue Generation at Meta

Given Meta’s AI focus, understanding how the company generates revenue is essential. Meta primarily earns from advertising, targeting businesses eager to reach their audience.

With a significant number of users on its platforms, advertising revenue has steadily increased, recently climbing 19% to over $39 billion. Net income surged 35%, hitting $15 billion.

As of September, more than 3.2 billion people worldwide used one of Meta’s apps daily, a 5% increase from last year.

This year, Meta introduced its AI assistant, which boasts 500 million monthly active users. By year’s end, it is on track to become the most widely used AI assistant. CEO Mark Zuckerberg aims for assistants to support all Meta users in various tasks, from business to leisure.

Such engagement could enable Meta to generate additional advertising revenue as users spend more time on its platforms, facilitated by AI assistants. Moreover, the company is incorporating AI to enhance the advertising experience. Recently, over 1 million advertisers utilized Meta’s generative AI tools to create 15 million ads in just a month.

Investing in Infrastructure

Meta has made significant investments, procuring the equivalent of 100,000 graphics processing units (GPUs) this year, essential for developing and training AI models. Currently, Llama 4 is being trained using this extensive infrastructure, with smaller models expected early next year.

Zuckerberg has stated that monetizing these AI investments won’t happen quickly. While the company’s budget for next year isn’t finalized, he indicates a further increase in AI spending is likely.

Back to the initial question: Is the stock worth buying now? Some investors may hesitate, concerned about Meta’s focus on AI as it diverts resources.

As Zuckerberg noted, while building necessary infrastructure is crucial, such investments might concern many in the short term. These expenses may impact earnings in the upcoming quarters, along with the potential for excess capacity weighing on future earnings.

Meta’s Strong Position

Despite these challenges, it’s crucial to recognize that Meta is a profitable company capable of investing in innovative technology while also delivering shareholder returns, including dividends. AI could significantly expand revenue opportunities by developing new products and services, making this investment risk potentially rewarding.

Currently, Meta shares trade at 25 times forward earnings estimates, presenting what appears to be a bargain relative to its long-term growth outlook. Thus, for investors, this stock could be a compelling buy, supported by its overall growth narrative and AI investments.

A Second Chance for Smart Investors

Ever felt you missed out on lucrative stock investments? It’s time to pay attention.

Sometimes, our expert analysts give a “Double Down” stock recommendation for companies expected to see significant growth. If you think you missed your chance, now may be the ideal time to invest before it becomes too late. The statistics speak for themselves:

• Amazon: Invest $1,000 when we doubled down in 2010 and you’d have $22,469!
• Apple: Invest $1,000 when we doubled down in 2008 and you’d have $42,271!
• Netflix: Invest $1,000 when we doubled down in 2004 and the total would reach $411,970!

Currently, we’re issuing “Double Down” alerts for three outstanding companies, and opportunities like this might not arise again soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

Randi Zuckerberg, a former director at Facebook and sister of CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino does not hold positions in the mentioned stocks. The Motley Fool has recommended and has stakes in Meta Platforms. They also follow a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.