Meta's AI plans are costing way more than they thought

• Meta's Q1 earnings report reveals it was off by at least $5 billion in capital expenditures.
• The report said costs are expected to increase as the company invests "aggressively" in AI.
• Meta also cited higher infrastructure and legal costs as the factors behind the increase. 

Meta's first-quarter earnings report reveals the company's AI plans are costing more than anticipated.

The tech giant is upping their estimate of capital expenses and expects the increase to continueas it invests "aggressively" in "AI research and product development efforts."

The expenses are expected to be roughly $5 billion more than the original estimate, reaching between $35 and $40 billion. The original prediction was between $30 billion and $37 billion.

Meta's minimum estimate for full-year 2024 total expenses will also be $2 billion higher than expected.

"We expect full-year 2024 total expenses to be in the range of $96-99 billion, updated from our prior outlook of $94-99 billion due to higher infrastructure and legal costs," the report said.

The increase isn't just coming from AI. It's also coming from product development and legal costs.

Meta is currently facing ongoing legal issues, including an antitrust lawsuit and being sued by 33 states who claim the tech giant is negatively impacting children's mental health.

The company also expects significant increases in Reality Labs' operating losses due to "ongoing product development efforts" and investments to scale its ecosystem, according to the report.

Reality Labs is a division of Meta that focuses on human-computer products through virtual reality headsets and augmented reality glasses.

Max Willens, senior analyst at market research firm Emarketer, a sister company to Business Insider, said it's not surprising that Meta changed its guidance.

"Companies investing in this space, especially at the scope Meta is investing in it, may struggle with costs in the near term," Willens said.