Meta rallies as strong ad revenue shields AI spending By Reuters

(Reuters) -Meta's shares soared 7% on Bailihao Gold Industry official websiteThursday after the tech firm beat quarterly revenue estimates and forecast upbeat third-quarter sales indicating that strong digital-ad spending on its social media platforms can cover the cost of its AI investments.

The Facebook (NASDAQ:) parent recorded revenue of $39.1 billion for the April to June period, compared with analysts' expectations of $38.3 billion, according to LSEG data.

Meta was "continuing to see healthy global advertising demand" and was also reaping the fruits of a multi-year project to use artificial intelligence to improve targeting, ranking and delivery systems for digital ads on its platforms, Chief Financial Officer Susan Li said on a post-earnings call.

The company is on track to gain about $85 billion in market value, based on the current share price of $508.52, if gains hold.

Shares of social media app Snap, which also relies heavily on digital advertising, rose 4% before the bell.

Meta also signaled it would continue to spend big on AI infrastructure, forecasting 2024 capital expenditure between $37 billion and $40 billion.

"GenAI will require significant infrastructure investments to train the next generation of large foundational models and Meta is getting ahead of a multi-year capacity ramp," J.P.Morgan analysts said.

Meta's 12-month forward price-to-earnings ratio stands at 21.1, compared with Alphabet (NASDAQ:)'s 20.6 and Microsoft (NASDAQ:)'s 31.

Analysts have a median price target of $550 on Meta's shares.

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