Meta 4Q25 Review: Why The Stock Can Go Up With Higher Opex And Capex
$Meta Platforms, Inc.(META)$
Financial Snapshot
Revenue: $59.893B (+24% YoY).
Total costs & expenses: $35.148B (+40% YoY) , the cost curve is steep, reflecting AI talent + R&D + infrastructure load.
Operating income: $24.745B, 41% operating margin.
Net income: $22.768B, (+38% YoY)
Three Things to Watch
1. The "why the stock can go up with higher Opex/CapEx" logic
– Q4 CapEx was $22.1B, signaling some near-term pacing discipline. Full-year 2025 CapEx was $71.4B.
– Ahead of the print, some sell-side forecasts had 2026 CapEx at $110B–$120B, implying roughly +53% to +71% YoY growth.
– Management ultimately guided 2026 CapEx at $115B–$135B, which implies +61% to +89% YoY—above what many investors were positioned for.
– Meta also guided 2026 total expenses at $162B–$169B versus $117.69B in 2025, implying about +38% to +44% YoY growth.
The market wasn't spooked by the upside surprise in Opex and CapEx for two main reasons:
1. Q1 revenue guidance beat expectations, reinforcing that the ad engine is still outperforming. Meta guided Q1 2026 revenue of $53.5B–$56.5B, implying close to ~30% YoY growth, one of the fastest growth rates the company has posted in recent years.
2. The biggest bull concern—AI spending overwhelming profits and cash generation—was partially defused by one line from the CFO: Meta expects 2026 operating income to be higher than 2025. In other words, even with higher spending, the company believes revenue growth and monetization can at least keep pace enough to protect operating profit. Free cash flow will likely still be pressured given the scale of CapEx, but the P&L signal mattered most to equity investors on the night.
2. AI capex ROI clarity
Meta's current ad decomposition stayed healthy: ad impressions +18% YoY and price per ad +6% YoY.
Management also backed the "AI improves recommendations → more engagement → better monetization" loop with product metrics:
– Instagram Reels U.S. watch time +30%+ YoY
– Facebook optimizations drove a 7% lift in organic Feed/video views, cited as the largest quarterly revenue impact from Facebook launches in two years
– Threads time spent +20% in Q4
– Instagram U.S. recommendations: ~75% from original posts after a +10ppt shift in Q4
Key points from Mark's prepared remarks:
– Scale: "More than 3.5B people" use at least one Meta app daily; >2B DAUs each on Facebook and WhatsApp (and “just shy” on Instagram).
– "Major AI acceleration" expected in 2026, especially as agents start to work (new products + internal productivity).
– Product thesis: combine LLMs with Meta's recommendation engines and ads stack—today's systems are "primitive compared to what will be possible soon."
– Commerce angle: agentic shopping + deeper integration across feeds and business messaging/WhatsApp.
– Hardware bet: AI glasses are positioned as the "ultimate" interface; he claims glasses sales more than tripled last year.
– Infra strategy: "Meta Compute," more focus on silicon + energy, and engineering cost down over time (he even references cost per gigawatt dropping as optimization and supply chain mature).
3. Reality Labs is still a drag, but "near peak" language matters
Family of Apps (FoA): revenue $58.938B; operating income $30.766B
Reality Labs (RL): revenue $0.955B; operating loss -$6.021B
Notably, management added that RL investment is increasingly aimed at glasses/wearables, with losses likely similar to last year and "likely the peak," then trending down over time.
What to watch next
From a narrative-changing standpoint, Zuckerberg's "major AI acceleration" is likely the catalyst investors are most focused on. If it can translate into clearer visibility on incremental AI-driven engagement, monetization, and the size of the growth runway, the stock's reaction would likely skew more constructive.
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- Brando741319·00:35GoodLikeReport