Meta puts Muse agent at heart of AI strategy

HIGHER COSTS

Still, Zuckerberg acknowledged that the costs of offering Muse were higher than those associated with many of Meta’s other new products over the years, and said the company would move to monetise the agent “somewhat sooner on this than our normal playbook”.

Meta CFO Susan Li forecast the company’s AI businesses would begin contributing incremental revenue in 2027 and become “a meaningful source of revenue diversification over time”.

The executives also emphasised that AI would be the focus moving forward for Meta’s loss-making Reality Labs unit, which had led the charge on the company’s vision to build the “metaverse”, an immersive digital world that inspired its name change from Facebook to Meta in 2021.

In their financial report, they said they “remain focused on improving Reality Labs profitability” and forecast its losses would narrow next year to around US$15 billion “as we reallocate investment toward other priority areas, primarily AI”.

The company raised the lower end of its annual spending forecast, now expecting capital expenditure to be between US$135 billion and US$145 billion this year, up from US$130 billion to US$145 billion expected previously.

It reported a free cash flow deficit of US$2.12 billion in the third quarter, compared with positive free cash flow of US$10.63 billion a year earlier.

Revenue for the third quarter came in better than expected at US$64.60 billion, ahead of Wall Street estimates of US$63.37 billion, according to data compiled by LSEG. Meta also projected fourth-quarter revenue between US$73 billion and US$76 billion, above estimates of US$73.73 billion.

The early popularity of Muse and the release of a competitive new series of AI models have helped Meta justify its spending to investors, even though some enterprises are restricting the agent’s access over security concerns.

“The market has shifted from punishing Meta for spending to rewarding it for having a compelling product story,” said Jesse Cohen, senior analyst at Investing.com.