The growth in Meta's advertising indicates that the investment in AI is already yielding positive results.

• During the earnings call with analysts on Wednesday, CEO Mark Zuckerberg and CFO Susan Li highlighted the numerous ways in which AI has positively impacted the company's operations.
• In the second quarter, Meta experienced a 22% increase in advertising sales, which was twice the growth rate of its competitor, Google.
• Zuckerberg stated that AI is enhancing recommendations, aiding individuals in discovering superior content, and optimizing advertising encounters.

Mark Zuckerberg is urging skeptical investors to focus on the present benefits of massive spending on artificial intelligence.

On Wednesday, Zuckerberg and finance chief Susan Li highlighted how AI has contributed to Meta's growth in the digital advertising market, outpacing the competition.

"Zuckerberg stated on the earnings call that the AI work being done by Facebook will improve the effectiveness of recommendations, help people find better content, and make advertising experiences more efficient. These products are already at scale, and there is significant potential for growth."

Meta reported a 22% increase in revenue from the previous year to $39.07 billion, with 98% of its sales coming from advertising, mainly on Facebook and Instagram. This growth rate was double that of Google's ad business, which experienced a 11% increase in sales to $64.6 billion, as stated in its earnings report last week.

In their latest reports, Meanwhile and , both smaller than Meta, reported revenue growth of 21% and 20%, respectively.

Li stated that Meta's advertising business was positively impacted by online commerce, gaming, and the media and entertainment sectors, and that ad growth remained strongest in the Asia-Pacific region. She added that the company's enhanced ad performance helped boost overall ad prices, despite slowing growth in that region.

Mark Zuckerberg highlighted AI as the basis for Meta's revamped online advertising platform, which faced challenges following the 2021 iOS privacy update that restricted social media companies' ability to target users across the internet.

Mark Mahaney, an internet analyst at Evercore ISI, stated in an interview on CNBC's "Closing Bell: Overtime" on Wednesday that the company rebuilt their ad tech stack using AI and changed their user interface, resulting in increased user engagement. He added that this change has shown up in the revenue and profits. Mahaney recommends buying Meta shares.

After Wednesday's earnings report, which contained an optimistic outlook for the current quarter, Meta's shares increased by 7% in extended trading.

Meta, like other large tech companies, is investing heavily in graphics processing units (GPUs) to train AI models and handle demanding workloads. However, some experts have raised concerns about the expenditures, as much of the investment is linked to the belief that generative AI, as demonstrated by OpenAI's ChatGPT, will result in significant revenue growth in the future.

'Already seen a return'

While the bet is on major growth in the future, the company is currently experiencing rewards.

Mahaney stated that you have already witnessed a return with Meta in the past two years.

According to Angelo Zino, an analyst at CFRA Research, Meta has successfully addressed the concerns and challenges from a few years ago and is seamlessly incorporating AI into its ecosystem.

Meta's growth rates are outpacing those of its peers, as Zino observed.

Meta is still losing billions of dollars each quarter despite its continued investment in AI and the metaverse. Li stated that Meta anticipates significant capital expenditure growth in 2025 as it invests in AI research and product development.

Meta has raised the low end of its capital expenditure range for 2024 from $35 billion to $37 billion.

Li advises investors to view Meta's AI strategy as a dual-faceted approach, with "core AI" enhancing Meta's advertising platform and recommendation system, resulting in increased user engagement and improved ad performance, which have translated into revenue growth.

Li stated that the company does not anticipate that their Gen AI products will significantly contribute to revenue in 2024. However, they expect that these products will create new revenue opportunities that will allow the company to generate a substantial return on their investment.

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