Shareholders supported CEO Mark Zuckerberg’s ambitious capital spending drive, pushing Meta shares up 10% in after-hours trading after the company reported a 24% increase in its core ad revenue in the quarter ended Dec. 31. The company also expects first-quarter sales to beat Wall Street expectations.
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“This will be a pivotal year for delivering personal superintelligence, accelerating business infrastructure for the future, and shaping how we work going forward,” CEO Mark Zuckerberg said on a conference call with analysts.
This compares to the $72.22 billion Meta spent last year, with a projected capital expenditure budget of $109.9 billion, according to Visible Alpha.
Meta, a latecomer to the AI race, aims to achieve superintelligence, a theoretical milestone in which machines can outperform humans. To that end, the company has committed to spending to build several large AI data centers for superintelligence, and plans even bigger financial outlays to meet its burgeoning computing needs.
The company covers a large amount of its AI-related expenses through its advertising business, and its fourth-quarter revenue soared to $58.14 billion from $46.78 billion in the same period last year. Capital spending increased 49%, outpacing total revenue growth of 24% in the fourth quarter and fueling a 7 percentage point decline in operating margin.
Last year, Meta started advertising on WhatsApp and Threads, creating a direct rivalry with platforms like Elon Musk’s X, while Instagram’s Reels continues to compete with TikTok and YouTube Shorts within the lucrative short video market.
“Meta is an example of where valuation is actually not that harsh,” said John Belton, portfolio manager at Gabelli Funds, which owns Meta stock. “The benefits today are huge. They come not from the business generation AI side, but from the core business being supported by the AI infrastructure.”
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The company will face capacity constraints through most of 2026, Susan Lee, the company’s chief financial officer, said on a conference call.
Jesse Cohen, senior analyst at Investing.com, said long-term investors in the company are likely to view 2026 as a transition year needed for Meta’s advertising business to continue generating enough cash flow to fund its AI transformation.
Mehta expects total expenses to be in the range of $162 billion to $169 billion in 2026, up from $117.69 billion a year ago, as the company spent millions of dollars hiring top AI talent and increased employee compensation. Mr. Zuckerberg paid big bucks to AI giants and last year reorganized his company’s AI efforts under the division, sparking a talent war in Silicon Valley.
First-quarter revenue is expected to be between $53.5 billion and $56.5 billion, compared with analysts’ average estimate of $51.41 billion, according to data compiled by LSEG. The company beat expectations for profit and revenue for the quarter ended Dec. 31.
Reporting by Jaspreet Singh in Bengaluru. Additional reporting by Echo One in New York and Juvie Babu in Mexico City. Editing: Leroy Leo, Sayantani Ghosh, Diane Craft
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