Meta's Q4 Earnings Soar on AI and Ad Growth, But Soaring Costs Spark Investor Scrutiny
Meta Platforms (NASDAQ: META) reported fourth-quarter financial results that handily beat Wall Street estimates, showcasing the resilience of its core advertising business and its expanding user base. Despite the strong performance, the tech giant's ambitious—and costly—spending plans on artificial intelligence and the metaverse are becoming a central focus for investors.
Revenue for the quarter surged 24% year-over-year to $59.9 billion, exceeding consensus estimates of $58.5 billion. Operating income reached $24.7 billion, with a healthy margin of 41.3%. The company reported GAAP earnings per share of $8.88, well above the $8.21 analysts had projected.
User engagement remained strong, with Family Daily Active People growing 7% to 3.58 billion. The company's ad engine also showed power, with global ad impressions jumping 18%, though the average price per ad rose a more modest 6%.
Looking forward, Meta's revenue guidance for the current quarter, set between $53.5 billion and $56.5 billion, also surpassed expectations. However, it was the outlook for expenses that captured significant analyst commentary. The company projected 2026 total expenses could reach $162 billion to $169 billion, a substantial increase from prior forecasts, driven largely by aggressive investments in AI research, development, and massive data center infrastructure. Capital expenditures are also set to climb, anticipated to be between $115 billion and $135 billion.
"The core business is firing on all cylinders, which gives them the fuel for these ambitious bets," said Stifel analyst Mark Kelley, who maintains a Buy rating and a $785 price target on the stock. "The spending trajectory, however, is the new key variable. Management is betting that today's AI and infrastructure investments will secure their dominance for the next decade, but it will pressure margins in the near term."
The results underscore Meta's successful pivot towards leveraging AI across its advertising products and content recommendations, a move that has revitalized its growth narrative after a challenging 2022. Yet, the scale of its spending highlights the intense capital competition within the tech sector to lead the AI arms race.
What Investors Are Saying
David Chen, Portfolio Manager at Horizon Capital: "This is a textbook 'good news, bad news' report. The operational execution is impeccable, but the market hates uncertainty. These expense numbers introduce a new layer of long-term uncertainty about the payoff from AI investments. The stock reaction will be volatile."
Sarah Miller, Tech Analyst at ClearView Research: "The user growth and ad impression data are phenomenal. It shows Meta's platforms are not just maintaining relevance but deepening engagement. The spending is high, but it's targeted at the only areas that matter for future growth: AI and the underlying compute infrastructure. This is the cost of staying at the top."
Michael Rostov, Independent Investor & Commentator: "Here we go again. Zuckerberg is burning cash on sci-fi projects while shareholders foot the bill. 'Metaverse' was a money pit, and now 'AI' is the new justification for reckless spending. These projections are staggering. When do shareholders actually see the return? It's empire-building, not value creation."
Priya Sharma, Chief Strategy Officer at AdTech Dynamics: "From an industry perspective, Meta's ad performance proves the AI-driven targeting tools are working. The slight softness in ad pricing is likely cyclical and industry-wide. Their ability to guide revenue so high next quarter suggests they have unparalleled visibility into advertiser demand, which is a very positive sign."
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