Meta CEO Mark Zuckerberg defends the company's significant AI spending following the release of its Q4 2024 earnings report, which highlighted robust revenue growth yet sparked discussions on the implications of AI advancements like DeepSeek-R1, a groundbreaking model developed by Chinese company DeepSeek.

On January 29, during Meta's earnings call, Zuckerberg acknowledged that DeepSeek has introduced "innovative" developments in AI. However, he emphasized that it is still too early to assess its broader implications for the future of AI definitively.

Meta's Strong Financial Performance in Q4 2024

Meta reported total revenue of USD 48.385 billion for Q4 2024, a 21% year-on-year increase and above market expectations of USD 46.99 billion. Net profit soared by 49% to USD 20.838 billion, with diluted earnings per share rising 50% to USD 8.02. The company's operating margin improved from 41% in Q4 2023 to 48%.

Meta's daily active users (DAUs) reached 3.35 billion in Q4 2024, up 5% year-on-year, while Facebook's monthly active users exceeded 3 billion. Meta's capital expenditures totaled USD 39.23 billion for the full year, surpassing market expectations of USD 38.2 billion.

Yet, despite strong financials, Meta's stock price (Nasdaq: META) rose only 0.32% to USD 676.49 on January 29, with a market capitalization of USD 1.71 trillion. Following the earnings announcement, the stock dipped by over 2% in after-hours trading.

Meta's AI Strategy and DeepSeek's Impact

Meta plans to invest over USD 60 billion in AI in 2025, focusing on generative AI and core business development. Zuckerberg highlighted DeepSeek's recent release of the R1 model, which caused a stir in the industry. Meta has since formed four specialized teams to analyze DeepSeek's advancements and apply its findings to improve Meta's own Llama model.

Zuckerberg acknowledged that DeepSeek has demonstrated "some novel approaches" and that Meta is "digesting its outcomes," aiming to integrate these innovations into its AI projects. As a proponent of open-source AI, Zuckerberg reiterated Meta's commitment to making its Llama series freely available, emphasizing that advances in open-source research benefit all companies.

Zuckerberg said, "There's going to be an open-source standard globally, and I think that for our own national advantage, it's important that it's an American standard."

Despite DeepSeek's ability to achieve significant results with relatively modest resources, Zuckerberg stated that Meta will not reduce its AI spending. He views long-term investments in infrastructure and capital expenditures as a strategic advantage, particularly as advanced AI technologies demand significant server capacity to deliver "higher intelligence and better-quality services" to billions of users.

The Future of AI at Meta

Zuckerberg predicted that 2025 will be a pivotal year for AI, promising a "highly intelligent and personalized AI assistant" capable of serving over 1 billion users. He said Meta's AI assistant is expected to match a competent mid-level engineer's programming and problem-solving skills.

Zuckerberg also emphasized a focus on AI-powered tools for coding and creativity, which he believes will enhance the productivity of developers and advertisers alike. Meta's CFO, Susan Li, revealed that more than 4 million advertisers already use Meta's generative AI tools for ad creation.

Social Media Platforms and Advertising Revenue Growth

Meta's Family of Apps, including Instagram, Facebook, and WhatsApp, generated USD 47.302 billion in Q4 revenue, up 21% year-on-year. Advertising revenue reached USD 46.783 billion, with ad impressions increasing by 6% and average ad pricing rising by 14%.

WhatsApp's monthly active users in the U.S. surpassed 100 million, while Threads, Meta's Twitter competitor, exceeded 320 million monthly active users. Meta announced plans to test advertising on Threads but clarified that it would not significantly contribute to revenue in 2025.

Challenges in Reality Labs and Workforce Adjustments

Meta's Reality Labs division, responsible for AR and VR technologies, reported Q4 revenue of USD 1.083 billion, a 1% year-on-year increase, but continued to incur substantial losses of USD 4.97 billion, marking a 7% increase in losses compared to the previous year.

Meta's workforce grew by 10% year-on-year to 74,067 employees as of December 31, but the company plans to lay off 5% of its staff, targeting underperforming employees. Zuckerberg described 2025 as a "disciplined year," focusing on AI, smart glasses, and strengthening social media platforms.

Meta vs. Microsoft on AI Costs

On the same day as Meta's earnings call, Microsoft CEO Satya Nadella commented on DeepSeek's innovations, noting that declining AI costs are a clear trend. Nadella highlighted significant efficiency gains in AI training and inference over the years, with each generation of hardware doubling cost-effectiveness and each model generation improving performance by tenfold.

Meta's Broader Challenges and Commitments

As Meta navigates intense competition in AI and social media, its commitment to open-source AI, infrastructure investments, and AI-driven innovation positions the company to remain a leader in the rapidly evolving tech landscape.

Zuckerberg reaffirmed Meta's vision: "AI is not just about reducing costs—it's about achieving higher levels of intelligence and delivering superior services to billions of users. That's where our focus will remain."

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