Meta’s latest quarter landed with the kind of thud Wall Street likes to hear: heavy, solid, and full of cash-generating advertising. Revenue for the fourth quarter clocked in around 59.9 billion dollars, up roughly 24% year over year, while earnings per share hit about 8.88 dollars, comfortably ahead of consensus estimates. Investors responded in kind, pushing the stock higher as guidance for the coming quarters suggested the ad engine is not just intact, but still accelerating.
The catch, such as it is, comes on the expense line, where “AI” now reads like a very expensive three‑letter word. Meta’s operating margin has begun to reflect the cost of its ambitions, with overall expenses rising sharply even as profits remain robust. For now, shareholders seem content to tolerate the higher spending, so long as the ad business keeps spitting out record‑level cash and the growth narrative remains more science than fiction.
The 135 Billion Dollar Question: How Much AI Is Enough?
The headline that stopped even jaded tech investors mid‑scroll was Meta’s forecast that 2026 capital expenditures could reach between 115 billion and 135 billion dollars. That would be nearly double the 72.2 billion dollars the company spent in 2025, itself a step‑function increase from the prior year. In other words, Mark Zuckerberg is preparing to sign a check that would make some sovereign wealth funds blink.
Most of that outlay is earmarked for AI infrastructure — data centers, custom hardware, and the Meta Superintelligence Labs initiative that now sits at the center of the company’s long‑term story. Management has been clear that “AI” in this context is less about buzzwords and more about concrete, depreciable assets designed to power future models and services. On the earnings call, Meta framed the ramp as an unavoidable cost of staying relevant in a world where the leading models are already coming out of Google, OpenAI, and Anthropic.
Reality Labs: Still the Expensive Punchline
If AI capex is the serious part of Meta’s spending story, Reality Labs remains the line item that invites nervous laughter from value investors. The division posted about 955 million dollars in revenue for the quarter, modestly below expectations, while racking up roughly 6 billion dollars in operating losses. Losses in the unit have continued to grow even as the rest of the business posts record profitability, ensuring that Meta’s metaverse dreams still come with a very real income‑statement hangover.
Management has started to reposition parts of that spending, trimming jobs in metaverse‑centric operations and steering some of the savings toward AI‑adjacent efforts, including wearable devices and smart glasses with embedded AI assistants. The message to investors is that Reality Labs is evolving from a costly virtual playground into a testbed for more practical AI‑enabled hardware, though the numbers still look more science‑project than margin‑accretive business line.
Catching Up in the AI Arms Race
One awkward reality Meta is now addressing more openly: despite its early push into large language models with the Llama family, it entered 2025 trailing the perceived leaders in cutting‑edge AI. The company has encountered delays in rolling out its next major model, with internal deliberations about whether to keep the open‑weights strategy or pivot toward something more proprietary. That debate matters not only to developers, but also to investors trying to decide whether Meta will be a platform for others’ innovation or a full‑stack AI competitor in its own right.
Zuckerberg has promised a “major AI acceleration” in 2026, pointing to new hires and a rebuilt AI organization under the Meta Superintelligence Labs banner. The company plans to ship new models and products over the coming months, arguing that the trajectory — the speed at which performance improves — will matter more than the first version’s leaderboard ranking. For a firm that already commands a massive global user base and a lucrative ad machine, even “fast follower” status in AI could prove commercially powerful, particularly if it supercharges engagement and ad pricing across its apps.
Can AI Spending Pay Off Before Investors Lose Their Nerve?
The central tension in the Meta story now is less about whether the company can afford to spend, and more about how long investors will stay patient while it does. Research and development costs have surged — with quarterly R&D in the mid‑teens of billions of dollars — and overall expenses are slated to rise again as 2026 capex ramps. Yet cash generation remains powerful, with strong free cash flow even after the recent burst of infrastructure investment.
For now, Wall Street appears willing to treat Meta’s AI budget like a long‑dated call option funded by current ad profits rather than a mortal threat to the income statement. The risk, of course, is that AI turns out to be more utility than gold rush, compressing returns just as the industry’s capital bills come due. But if Meta’s models and products succeed in lifting engagement, ad pricing, and new revenue streams across billions of users, that 135 billion dollar bet may eventually look less like extravagance and more like table stakes.
The Sources
[1] Meta Rakes in Record Revenue and Profits for Q4, Details Massive AI Investments for 2026 https://finance.yahoo.com/news/meta-rakes-record-revenue-profits-210711445.html
[2] Meta earnings live recap: Stock climbs 8% on revenue beat as investors weigh big capex spending https://www.businessinsider.com/meta-q4-earnings-stock-price-ai-capex-live-updates-2026-1
[3] Meta stock climbs on Q4 earnings beat, plans to spend as much as … https://finance.yahoo.com/news/meta-stock-climbs-on-q4-earnings-beat-plans-to-spend-as-much-as-135-billion-on-ai-build-out-in-2026-154456872.html
[4] Meta beats Q4 revenue estimates, forecasts big 2026 AI spending https://finance.yahoo.com/video/meta-beats-q4-revenue-estimates-forecasts-big-2026-ai-spending-211746435.html
[5] Meta Q4 earnings beat as Zuckerberg predicts up to $135 billion in … https://fortune.com/2026/01/28/meta-q4-earnings-beat-mark-zuckerberg-ai-acceleration/
[6] Meta stock pops as revenue guidance outweighs higher than … https://finance.yahoo.com/news/meta-stock-pops-revenue-guidance-215026394.html
[7] Meta Q4 2025 presentation: Revenue surges 24% as AI investments … https://www.investing.com/news/company-news/meta-q4-2025-presentation-revenue-surges-24-as-ai-investments-accelerate-93CH-4471646
[8] Meta touts growth but AI spending to surge | LinkedIn https://www.linkedin.com/news/story/meta-touts-growth-but-ai-spending-to-surge-6931748/
[9] Meta beats earnings as 2026 AI capex tops out at $135 billion https://finance.yahoo.com/news/meta-beats-earnings-2026-ai-231659486.html
[10] Meta Just Proved The AI Bulls Right – Seeking Alpha https://seekingalpha.com/article/4863613-meta-just-proved-the-ai-bulls-right
[11] Meta Reports Fourth Quarter and Full Year 2025 Results https://investor.atmeta.com/investor-news/press-release-details/2026/Meta-Reports-Fourth-Quarter-and-Full-Year-2025-Results/default.aspx
[12] Meta shares jump 10% on stronger-than-expected revenue forecast https://www.cnbc.com/2026/01/28/meta-q4-earnings-report-2025.html
[13] Meta Platforms Q4 Earnings Call Highlights – Yahoo Finance https://finance.yahoo.com/news/meta-platforms-q4-earnings-call-010006140.html
[14] Meta posts stronger-than-expected Q4 results though costs continue … https://finance.yahoo.com/news/meta-posts-stronger-expected-q4-213605534.html
[15] LIVE: Meta Q4 earnings call – YouTube https://www.youtube.com/watch?v=1Tm7gX-WctI
