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ADDS analyst

Facebook owner Meta saw net profit and revenue beat expectations on Wednesday as the company said it would expand its investment in artificial intelligence.

The social media giant, which is also the parent company of Instagram and WhatsApp, said its net profit was $15.7 billion in the third quarter – up 35 percent compared to the same period last year.

Sales rose 19 percent to $40.6 billion, slightly above analysts' estimates.

But investors sent Meta shares lower in after-hours trading on the prospect of AI spending in the coming months and another big loss at Reality Labs, its virtual and augmented reality unit.

“We had a good quarter, driven by AI advancements in our apps and business,” Meta founder and CEO Mark Zuckerberg said in a statement.

Like its big tech peers, Meta is diving into artificial intelligence to create revenue streams outside of its core social media business.

In recent months, Zuckerberg has focused most of his attention and spending on the company's AI innovations, introduced as chatbots on its platforms or used to improve its advertising technology.

On Wednesday, Meta raised its investment outlook again: For 2024 alone, it forecasts a range of $38 billion to $40 billion, compared to $37 billion to $40 billion previously, much of it for AI.

In the first quarter of this year, spending had already caused concern among investors despite a doubling of profits.

But a quarter later, Meta's results impressed investors with another rise in profits and showed that its core advertising business could support investments.

“Meta's solid revenue growth in the quarter will help ease investor concerns about its AI investments,” said Debra Aho Williamson of Sonata Insights, adding that those investments made it easier to run ads on the platforms.

However, she warned: “The full impact of these features will not be felt until 2025 or beyond.”

Reaction was positive last month when the company unveiled its Orion augmented reality glasses, which are still experimental but boost confidence that Meta will be a leader in wearable AI devices.

Meta also hopes to capitalize on the buzz surrounding its Ray-Ban Meta smart glasses, which the company co-developed with EssilorLuxottica, the European eyewear giant.

Analysts believe the glasses could be a hot topic during the end-of-year holiday season.

But recurring losses at Reality Labs, the VR division, continued to weigh on investor sentiment. The division reported third-quarter sales of $270 million and an operating loss of $4.4 billion.

Meta's share price slipped more than two percent after the earnings results were released as traders digested the news.

Bur-Arp/St