Facebook’s announcement on Wednesday that it would hike capital expenses to as much as $7.5 billion this year was more audacious than many analysts expected. But it’s savvy for Facebook to use its profit cushion from a recent hot streak to execute an expensive video-centric strategy.
The capital expenses projected for the coming year, which would increase by up to two-thirds from $4.5 billion in 2016, would continue a recent trend for Facebook. For the past year and a half, Facebook has maintained a higher ratio of capital expenditures to sales than Alphabet, a heavy spender itself due to its YouTube video and “moonshot” business lines. Operating expenses would also grow by 40% to 50% next year, compared to 34% the prior year, as the company tries to win more talent wars (in areas like AI), CFO David Wehner said during the company’s fourth-quarter earnings call on Wednesday.