The data centre ramp-up, which would include projects like the proposed ~$1 billion facility in Wisconsin, is designed to support its growing AI services and next-gen devices.
CFO Susan Li warned, however, that rising infrastructure hardware costs, driven by global trade uncertainty, are also inflating the bill.
“The higher costs we expect to incur for infrastructure hardware this year really comes from suppliers who source from countries around the world,” Li said.
“There’s just a lot of uncertainty around this, given the ongoing trade discussions. We’re also working on our end on mitigations by optimising our supply chain, and our outlook is really trying to reflect our best understanding of the potential impact this year across all of that uncertainty.”
Meta’s Q1 capital expenditure totalled $13.7 billion, driven by investments in servers, data centres, and network infrastructure.
That momentum has now prompted the company to raise its full-year 2025 CapEx forecast to between $64 billion and $72 billion. up from a previous estimate of $60–65 billion.
Meta’s infrastructure spending spree is part of its long-term AI vision, from powering large language models like the new Llama 4 to its AI services, like its new standalone Meta AI app.
CEO Mark Zuckerberg called AI “the major theme right now,” outlining five long-term bets Meta is making: improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices.
“These are each long-term investments that are downstream from us building general intelligence and leading AI models and infrastructure,” Zuckerberg said.
“Even with our significant investments, we don’t need to succeed in all of these areas to have a good ROI. But if we do, then I think that we will be wildly happy with the investments that we’re making.”
Li noted that even with this year’s expanded capacity, Meta is still “having a hard time meeting the demand that teams have for compute resources across the company”.
Recent reports suggested Meta was looking to team up with several hyperscalers in a bid to share some of the cost of the AI infrastructure buildout.
Li said Meta was “always looking for opportunities to continue deepening or expanding partnerships” but that it was committed to solely funding the infrastructure to train its Llama models, adding: “We don’t have any expectation that that will change at this point”.
Regulatory repercussions loom
While Meta races ahead on infrastructure and AI, its European business may soon be forced to hit the brakes.
The European Commission recently ruled that Meta’s “subscription for no ads” model, which offered Facebook and Instagram users the choice between free, ad-supported access or a paid ad-free tier, is not compliant with the Digital Markets Act (DMA).
“We expect we will need to make some modifications to our model,” CFO Susan Li said on the call, claiming it would “result in a materially worse user experience for European users and a significant impact to our European business and revenue as early as the third quarter of 2025”.
Meta plans to appeal the decision and the €200 million fine, but any enforced changes may be imposed before or during the process..
“Our advertising revenue in the European Economic Area and Switzerland, which would be the geographies impacted here, was 16% of our worldwide total revenue in 2024,” Li said.
“We are continuing to engage actively with the European Commission further on this, so we hope to have more clarity by next quarter’s call.”
Reality check for Reality Labs
Among the gloomier postings in Meta’s latest earnings call was that Reality Labs, its virtual reality (VR) or metaverse division, reported revenue of $412 million, a 6% decrease year-over-year.
Meta cited the drop due to lower sales of Meta Quest headsets, with the latest revenue drop coming as the firm cut yet more jobs in the embattled division.
But Zuckerberg appeared bullish, claiming there was growing traction for its revamped AI-powered Ray-Ban glasses.
He emphasised ongoing investments aimed at expanding the distribution and capabilities of the AI smart glasses, viewing them as a significant opportunity for the company.
Following the call, Mike Proulx, VP, and research director at analyst firm Forrester, described Reality Labs as a “leaky bucket” and suggested that Meta should shutter its metaverse efforts to benefit its AI efforts.
“This would allow the company to give more focus to its AI projects, including Llama, Meta AI, and AI glasses,” Proulx told Capacity. “Not only has Meta made demonstrable strides with AI, but it’s helping to future-proof Meta as a growth company should its family of apps get decimated by the current antitrust case.”
RELATED STORIES
DMA fines on Meta, Apple spark transatlantic tech tensions: Regulation or retaliation?
Meta battles FTC to keep Instagram and WhatsApp as monopoly trial begins
Meta's secret Wisconsin data centre project to cost nearly $1bn
