Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide.
While not a current holding in any portfolios, Meta Platforms is frequently a holding, and a stock of interest for clients and worth covering.
Meta Platforms delivered a robust fourth-quarter performance, exceeding Wall Street expectations on both revenue and profit. The company reported $48.4 billion in revenue, marking a 21% year-over-year increase and surpassing the consensus estimate of $47 billion. Advertising, which remains the core of Meta’s business, contributed $46.8 billion, also up 21% from the prior year. Operating income came in at $23.37 billion, significantly above the $20.09 billion estimate, driven by efficiency gains and strong digital ad demand. Earnings per share (EPS) surged to $8.02, well ahead of the $6.78 estimate and almost 50% higher than the same period last year.
Despite the strong quarter, Meta’s forward guidance raised concerns among investors. The company projected first-quarter revenue of $39.5 billion to $41.8 billion, with the midpoint of this range falling slightly below the $41.7 billion consensus estimate. This cautious outlook suggests that while advertising growth remains solid, Meta is bracing for potential headwinds, including regulatory challenges in the U.S. and EU, as well as a 3% foreign currency impact.
One of the biggest concerns for investors is Meta’s 2025 expense forecast, which came in much higher than expected. The company anticipates total expenses between $114 billion and $119 billion, well above analyst estimates of $108 billion. This reflects continued investment in AI infrastructure, Reality Labs, and other futuristic initiatives. Similarly, capital expenditure (CapEx) is projected to reach $60 billion to $65 billion, exceeding the expected $52.4 billion. While Meta reiterated that the bulk of this spending will support its core business, the sheer scale of investment has raised questions about margin pressures and the timeline for monetising AI initiatives.
Meta’s ad business showed mixed signals. While ad impressions grew by 6%, their slowest pace in recent quarters, the average price per ad rose 14%, suggesting that the company remains confident in its pricing power. This balance indicates that Meta is focusing on improving ad efficiency rather than solely driving volume, a strategy that has helped sustain mid-teen revenue growth.
Following the earnings release, Meta’s share price initially dipped before recovering to trade 5.30% higher, reflecting an overall positive reaction to beats on revenue and profit, offsetting concerns about costs and forward guidance. While Meta’s core advertising business remains strong, investors likely remain cautious about whether AI and Reality Labs investments will generate sufficient returns in the near term.
