Meta's going to spend like crazy on AI in the next year — and investors don't hate it

• Meta's second-quarter revenue hit $39 billion, surpassing Wall Street expectations.
• The company says it's going to keep spending big this year to support AI research and development.
• Investors cheered despite the plans for increased spending. Meta's stock rose nearly 7% after hours.

Investors seem to be backing Meta's continued heavy spending on AI.

The social media giant surpassed analyst expectations in its second-quarter earnings report released Wednesday. Its revenue hit $39 billion, a 22% increase over the same period last year. Wall Street analysts had expected just over $38 billion.

Meanwhile, the company said it expects infrastructure costs — such as the money it's plowing into building its artificial intelligence capabilities — to be a "significant driver of expense growth." It's expecting to spend at least $35 billion to $37 billion this year — an increase from its last estimate. It kept its maximum spend estimate at $40 billion for the year.

And it is planning to keep spending in 2025, too.

"While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts," the company said in its earnings report.

Even after saying it would spend more, investors apparently liked what they heard: Meta's stock zoomed ahead nearly 7% in after-hours trade. It's up nearly 40% so far this year.

Meta CEO Mark Zuckerberg said on the investor call that the big focus is "figuring out the right amount" of infrastructure for the AI future. Meta is planning the computing clusters and data centers for the next several years, he said, but it's "hard to predict" how that'll pan out.

"I'd rather risk building capacity before it's needed rather than too late," Zuckerberg said.

Meta's bullish attitude toward AI spending isn't new.

Zuckerberg has shared plans to purchase 350,000 Nvidia GPUs by the end of 2024, bringing Meta's GPU collection to roughly 600,000. Analysts have estimated Meta could spend about $18 billion by the end of 2024. A JPMorgan analyst said the company's costs could hit $50 billion by 2025, according to a report from Quartz.

Still, the reaction from investors was a sharp contrast from Microsoft's earnings on Tuesday. While Microsoft reported an overall positive quarter in terms of revenue, Microsoft Azure spending slightly missed estimates and shares dropped in post-market trading by more than 6%. They lost another 1% on Wednesday.

Unlike Microsoft, Meta seemed to persuade investors it was moving in the right direction with its AI investments with growth in key areas of investment.

"We've released the first frontier-level open-source AI model," Zuckerberg said. "We continue to see good traction with our Ray-Ban Meta AI glasses and we're driving good growth across our apps."

Still, similar to Microsoft, Meta executives said that over the long-term, they expect their stepped-up investments in AI to pay off.