"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."
AI adoption is producing strong returns for leading technology companies, with several top firms still offering solid growth prospects at reasonable prices. Meta Platforms and Alphabet are using AI to improve user recommendations, increase ad targeting effectiveness, and raise return on ad spending, enabling higher ad pricing and revenue expansion. Meta's massive Facebook and Instagram user base supports a powerful advertising business that grew revenue 26% year over year last quarter. Analysts project roughly 16% annualized earnings growth for Meta, while management is investing heavily in AI infrastructure, which may pressure near-term margins but could deliver larger long-term payoffs.
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