July 29 (Reuters) - Meta Platforms narrowed the range of its forecast for annual capital expenditure on Wednesday, as the social media giant doubles down on building a fleet of data centers to expand its AI computing power.
The Facebook parent now expects 2026 capital expenditure to be between $130 billion and $145 billion, compared with its prior forecast of $125 billion to $145 billion.
At the heart of Meta is its advertising business, with Reels battling TikTok and YouTube Shorts for dominance in the short-video market and Threads taking on Elon Musk's X, while AI powers more precise ad targeting and recommendation systems to boost user engagement.
Trend advisory firm Madison and Wall said in June it expects ad revenue to rise by 8.3% to $1.42 trillion in 2026, benefiting from several cyclical sports events, including the Winter Olympics and the FIFA World Cup. Social media advertising is expected to rise 14% to $421 billion during the year.
Ad sales are also powering CEO Mark Zuckerberg's pursuit of superintelligence — a hypothetical concept where AI surpasses human intelligence in every possible way — and the development of its Meta AI assistant and AI smart glasses.
Meta results come days after Alphabet's first cash burn on record in the second quarter jolted investors, as soaring AI spending strains one of the world's most profitable companies.
The feverish spending by Big Tech is expected to reach well above $700 billion this year, primarily on AI, while Morgan Stanley has pegged the estimated spend at more than $1 trillion for the next year.
Meta is building several gigawatt-scale data centers across the U.S., including one in rural Louisiana, a project it expects to expand to 5 GW of compute capacity, with investment increasing to more than $50 billion.
Media reports, including by Reuters, said earlier this month that Meta was in talks to lease computing power to Anthropic in a potential deal worth up to $10 billion over two years.
Meta on Tuesday formed a venture for its El Paso, Texas, data center, which is 80% owned by BlackRock and 20% by Meta, and nearly resembles its arrangement with Blue Owl Capital for the Louisiana project, as the company looks to keep debt off its balance sheet.
While investors are scrutinizing Meta's AI spending, it faces privacy-related risks tied to its smart glasses. The company said in a court filing this month that four states were seeking $1.4 trillion in penalties over accusations it designed its Facebook and Instagram platforms to addict young users and misled the public about their safety.
Meta had warned in April that legal and regulatory blowback in the European Union and the U.S. over youth social media issues "could significantly impact" its business and financial results.
(Reporting by Katie Paul in New York and Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar and Nia Williams)
