Investing.com -- Meta Platforms' (NASDAQ:META) heavy investments in artificial intelligence are helping turn the Instagram-owner's content recommendation models into a "competitive advantage," according to analysts at Citi.
In a note to clients, the analysts said Meta has seen continued engagement "strength and demand" from its users, citing growth in so-called "ad load" on Instagram's short-form video segment Reels.
Ad load, or the amount of advertising content offered within a specific digital context or timeframe, is projected to have increased by 70 basis points to 22.2% in the third quarter, the Citi analysts' research showed.
The strategists subsequently bumped up their price target for Meta's share price to $645 from $580 and called the stock its "top pick" in the Internet sector.
"Meta’s competitive advantage is now deeper and wider given improved engagement, investments in [generative artificial intelligence], and multiple newer offerings on-the-come," the analysts said.
In July, Facebook-parent Meta's Chief Executive Mark Zuckerberg said that strength in the firm's core advertising business will help backstop plans to spend heavily on AI in the coming years.
Meta lifted the lower range of its annual capital spending outlook to a range of $37 billion to $40 billion from $35 billion to $40 billion previously, while the total expense guidance for the full-year remained unchanged in a range of $96 billion to $99 billion.
The company also noted that it "expect[s] infrastructure costs will be a significant driver of expense growth next year as we recognize depreciation and operating costs associated with our expanded infrastructure footprint."
Meta guided for total revenue in the range of $38.5 billion to $41 billion in the third quarter, or $39.75 billion at the midpoint, beating Wall Street estimates of $39.09 billion.
Meanwhile, for the three months ended on Jun. 30, the company reported earnings of $5.16 on a share on revenue of $39.07 billion, beating estimates $4.70 and $38.26 billion, respectively.