“We anticipate that our full-year 2023 total expenses will be in the range of $88-91 billion increased from our prior range of $86-90 billion due to legal-related expenses recorded in the second quarter,” said Susan Li, Chief Financial Officer (CFO) of Meta, during an earnings call meeting with investors on July 26.
Li said that the higher expenses for the year also includes around $4 billion needed to reorganize their facilities and pay for severance and other employee-related expenses. Further, the company anticipates losses from the Reality Labs division, which deals with AR/ VR, to increase year-over-year in 2023.
Investments in AI and Metaverse to continue in 2023: Although there was no quantitative outlook beyond 2023 during the call, Li talked about three factors that will likely contribute to increased expenses in 2024, as Meta continues to invest in AI and the metaverse:
- Higher infrastructure-related costs: Meta expects to spend more on maintaining and expanding their technical infrastructure in 2024, like data centers and servers, which are essential for their AI and other projects. “We also expect to incur higher operating costs from running a larger infrastructure footprint,” said Li.
- Increase in payroll expenses: Meta plans to hire more skilled technical employees leading to higher payroll costs.
- Investment in Reality Labs: Meta expects operating losses to increase meaningfully year-over-year due to ongoing product development efforts in Augmented Reality (AR)/ Virtual Reality (VR).
Why it matters: Meta is not alone in planning deeper investments in Artificial Intelligence and similar technologies. Other big tech companies like Alphabet and Microsoft also seem ready to heavily invest in data centres and similar infrastructure in preparation of the coming AI-age. Microsoft told Reuters that it anticipates its AI costs to generate revenue in the second half of 2024 and based on what Meta has told its investors so far, the latter is also hoping for a similar trajectory from its investments.
Capital Expenditures for 2023 and 2024: Li said capital expenditures are expected to be between $27 billion to $30 billion in 2023, which is less than their previous estimate. The reduction is because they found some cost savings, particularly non-AI-servers, and faced delays in certain projects. However, they expect their capital expenditures to grow in 2024, especially for data centers and servers to support their AI work.
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