Facebook parent metaplatforms (META-3.36%) has invested billions of dollars inside artificial intelligence as it seems keep pace with his Beautiful 7 competitors. The tech giant warned that these expenses will only grow into next year and beyond.

In his third quarter earnings report On Wednesday, Meta increased capital expenditures estimates for fiscal year 2024 to between $38 billion and $40 billion, from $37 billion to $40 billion previously. The company said it expects “significant capital expenditure growth through 2025” and a “significant acceleration in infrastructure cost growth next year.”

CEO Mark Zuckerberg gave analysts a hint on a call Wednesday of what some of these investments could look like, but said the company would provide more details once it finalizes its fourth-quarter budget.

“First, it is clear that there are many new opportunities to use new AI developments to accelerate our core businesses, which should have strong ROI in the coming years,” Zuckerberg said. “So I think we need to invest more there.”

“And second, our AI investments continue to require serious infrastructure, and I expect to continue to invest significantly there,” he added.

Meta shares fell about 1.8% shortly after the market opened Thursday.

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Strategists at Jefferies (JEF-1.24%) estimate next year’s spending to total $110 billion — a 14% increase from this year’s estimated $97 billion, according to a Thursday note. They also project capital expenditures of $52 billion, an annual increase of 33%.

“Investors have tolerance for AI spend as long as they can understand the vision and impact and see active progress,” said Christophe Ponsart, partner in the applied AI practice at consulting firm Qvest.US. “Meta is actively keeping the public informed about ongoing progress with these investments and releasing models iteratively and often – which is a good thing for investors.”

The Menlo Park, California-based company went out of its way Wednesday to demonstrate how its existing investments in AI are showing signs of paying off. Meta said more than a million advertisers used generative AI tools to create more than 15 million ads last month.

Meta AI, the company’s AI chatbot embedded in popular social media platforms such as Instagram and Facebook, has more than 500 million monthly users. Zuckerberg had previously said it was on its way to becoming that the most used AI assistant in the world by the end of this year. And AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year.

Wedbush analysts led by Scott Devitt said they believe “more investment is warranted given the benefits AI already brings to the company and the significant opportunities for future growth” across its applications and at Reality Labs, the unit responsible for Meta’s virtual and augmented reality projects. .

For the three months ended September 30, Reality Labs had an operating loss of $4.43 billion. Meta said it expects operating losses to “increase significantly year-over-year.”

Bank of America (BAC-0.97%) researchers said in a note Thursday that “Meta’s growing focus on AI could deliver positive product surprises in the coming quarters,” including AI customer service offerings and Meta AI advertising or subscriptions, which could provide investors with additional optimism.

Overall, Wedbush said Meta’s third-quarter results were “healthy” and showed AI’s increasing momentum. Meta reported net income of $15.69 billion for the quarter, or $6.03 per share, compared to $11.58 billion in the same quarter last year – better than Wall Street estimates.

Revenue came in at $40.59 billion, up 19% from $34.15 billion a year ago, surpassing Wall Street’s estimate of $40.19 billion for the quarter.

Meta has had a strong year, with a price increase of approximately 68% in 2024.