Few companies have spent as much on artificial intelligence (AI) as Meta Platforms (META +0.30%). While many companies have invested heavily in AI infrastructure, almost nobody has spent as much on talent. Meta made headlines a few weeks ago when it was offering some of the biggest names in AI nine-figure bonuses to join its team. That's practically unheard of compensation outside of sports leagues, which showed Meta meant business regarding its AI approach.
However, there appears to be a strategic pivot underway. Several reports have broken about Meta pausing AI hiring spending. This caused a slight bit of panic, as many worried that AI may not be panning out as some predicted. I don't think that's the case at all, and this pause on AI talent spending by Meta is a smart move.
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Meta is making sure its talent is working on worthy projects
The headline "Meta pauses AI spending" is a real attention grabber. The problem is, it's not entirely true. What really happened is that Meta got who it wanted to be on its team; now, it's reorganizing itself to align the talent into various projects. One of those teams is even called "TBD lab," indicating that nobody knows what that division will be working on.
With Meta acquiring top-end talent and taking a moment to align itself with various goals, this is a welcome change from previous strategies. Just a few years ago, Meta Platforms spent billions on its metaverse ambitions that hardly amounted to anything. Now, it is ensuring that what it's pursuing is worthwhile, showcasing that CEO Mark Zuckerberg has learned from past mistakes.
NASDAQ: META
Key Data Points
Another factor is that Meta is only pausing spending on AI talent, not its infrastructure. In its Q2 earnings press release, management commented that there will be "meaningful upward pressure" with 2026 expense growth. The largest driver will be infrastructure costs, while employee compensation is the second-largest. This increase is something investors must keep in mind, as the pause in spending is for talent acquisition, not for infrastructure or retaining top talent.
In 2025, management projects total expenses to be between $114 billion and $118 billion, reflecting a growth rate of 20% to 24%. With management indicating that 2026's expense growth rate will be faster than that of 2025, it's safe to say that Meta's expenses for 2026 will be around $150 billion.
Meta is still investing heavily in the AI arms race, but these expenses are already starting to yield results.
Meta's recent results have been phenomenal
Zuckerberg is bullish on how AI can improve its business, mainly focusing on how its users interact with ads across its social media platforms. Meta has already seen an increase in time spent on the platform per user and has driven more ad conversions with the tools it has introduced. There's still plenty more innovation in store for Meta, and it hasn't even scratched the surface of what it can do with AI agents, which could potentially reduce the overall workforce.
As a backdrop to all this massive AI spending, Meta is performing phenomenally well, with Q2 revenue rising by 22% and earnings per share increasing by a jaw-dropping 38%. Meta has earned the right to spend how it pleases with results like this, and if it can continue making headway in AI implementation, I wouldn't be surprised to see growth like this over the next few years.
Meta is an interesting stock to watch over the next few years, and I believe it will also prove to be a successful investment. Although the stock is a bit pricey at 27 times forward earnings, it still ranks among the cheaper big tech stocks. As a result, Meta Platforms is a solid buy, having hired a large number of top talents. It's now poised to unleash them on various AI projects.
