Meta Platforms Inc.

topped projections for second-quarter sales and gave a stronger-than-expected forecast for the current period, a sign that the social media company’s advertising business is still growing quickly enough to support aggressive spending on

artificial intelligence

.

Shares jumped as much as 12 per cent to US$779.34 after markets opened in New York on Thursday. Third-quarter sales will be US$47.5 billion to US$50.5 billion, Meta said in a statement Wednesday, with the midpoint of that range exceeding the average analyst estimate of US$46.2 billion, according to data compiled by Bloomberg. The social media giant, which owns Instagram and Facebook, reported second-quarter revenue of US$47.5 billion.

Meta lifted the low end of its forecast for 2025 capital expenditures as it continues to invest heavily in the talent, infrastructure, data centers and energy needed to compete in a fast-moving AI race. The company now expects to spend US$66 billion to US$72 billion this year. The projection was adjusted higher in April to account for ongoing trade disputes and AI investments.

“We really believe that this is a time for us to really make investments in the future of AI, as I think it will open up both new opportunities for us in addition to strengthen our core business,” chief financial officer Susan Li told investors during a call after the results were announced.

Meta and its big tech peers, including Alphabet Inc. and Microsoft Corp., are relying on their legacy businesses to fund their pursuits of pricey AI talent and data centers, adding billions to their spending plans.

Meta stock was up 18.7 per cent so far this year before Wednesday’s report.

Chief executive

Mark Zuckerberg

is spending to build new data centers and lure top AI researchers with compensation packages valued at hundreds of millions of dollars, Bloomberg has reported. Meta recently restructured its internal AI division, now referred to as Meta Superintelligence Labs, in an effort to build human-level AI capabilities and apply that technology across the company’s products. The group is led by Alexandr Wang, the former CEO of data labeling company Scale AI, who joined Meta in June after Zuckerberg paid US$14.3 billion for a 49 per cent stake in the company.

Zuckerberg has said Meta has the ability to spend aggressively to grow its slice of the AI market thanks to the company’s consistent advertising business.

“I believe deeply in building personal superintelligence for everyone,” Zuckerberg said Wednesday in a video posted to Instagram. “At Meta, we have the resources to build the massive infrastructure required, and the ability to deliver new technology to billions of people.”

Meta “crushed it” in the quarter, in part because AI improvements allowed the company to increase the average price of its ads, Matt Britzman, an equity analyst at Hargreaves Lansdown, said in an email. “All this spending adds some near-term risks to the bottom line, but Meta looks set to be a clear winner in the AI space over the longer term.”

Meta’s competitors are also choosing to spend more now — and grow while businesses and consumers are forming their AI habits — rather than miss out. Last week, Alphabet Inc. raised its full-year capital expenditure forecast to US$85 billion due to higher AI spend.

Wall Street has previously been more skeptical of Zuckerberg’s big bets on new technology. He renamed the company Meta after the “metaverse,” the idea that people would work and socialize in a virtual world with the help of headsets. That vision has been slow to take hold.

At the same time, Meta’s hardware division has come under scrutiny for bleeding cash for years. In the second quarter, Reality Labs generated $370 million in revenue — less than the $386 million analysts expected — with $4.5 billion in operating losses. While the company sold more smart glasses, it saw a decline in sales for its Quest headsets.

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“In some ways, this race is historically akin to the races for the PC, web browser, search engine, and smartphone,” Mike Proulx, an analyst for Forrester, wrote in an emailed statement. “But the big difference is that this race is pacing so much faster because AI — the very thing that Meta and others are racing towards — helps to accelerate itself.” Proulx added that to win the AI race, companies will need to reach into their “deep pockets.”

—With assistance from Subrat Patnaik.

Bloomberg.com