"With over 3 billion people using Facebook and Instagram, Meta Platforms has built a powerhouse advertising business. It is widening its competitive moat by using AI-powered ad tools to deliver better recommendations and more effective ad targeting for advertisers. This is increasing return on ad spending and, in turn, driving higher ad pricing, which helped drive a 26% year-over-year increase in the company's revenue last quarter."
"Given the opportunity, management plans to spend aggressively on AI infrastructure. While the potential for margin pressure may concern some investors, these expenditures are ultimately allowing Meta to develop better AI models. The recent growth in ad revenue shows that building more robust AI systems could have an even bigger payoff for the business and shareholders over the long term."
Artificial intelligence has driven strong returns for leading tech companies, and some leaders still offer solid growth prospects at reasonable prices. Meta Platforms serves over 3 billion Facebook and Instagram users and has built a powerhouse advertising business. Meta uses AI-powered ad tools to deliver better recommendations and more effective ad targeting, increasing return on ad spending and enabling higher ad pricing. That contributed to a 26% year-over-year revenue increase last quarter. Wall Street consensus forecasts roughly 16% annualized earnings growth, and management plans aggressive AI infrastructure spending that may pressure near-term margins but aims for larger long-term payoffs. Market concern about near-term profitability creates an opportunity for patient investors. Alphabet generates enormous revenue and profit from billions of people.
Read at The Motley Fool
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