Meta Stock Soars on Q4 Earnings Strength, Yet Rising Investment Costs Temper Optimism
The longevity of Meta's advertising engine was reaffirmed in its most recent earnings, but the margin picture is still clouded by a larger..
Quick overview
- Meta's fourth-quarter earnings exceeded expectations, with adjusted earnings per share at $8.88 and revenue at $59.89 billion.
- The company's advertising segment showed resilience, generating $58.14 billion in revenue despite ongoing macroeconomic uncertainty.
- However, Reality Labs continued to incur significant losses, with operating losses widening to $6.02 billion, raising concerns among investors.
- Looking ahead, Meta's guidance for Q1 revenue is optimistic, but the increased capital expenditure forecast signals a heavier investment burden.
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The longevity of Meta’s advertising engine was reaffirmed in its most recent earnings, but the margin picture is still clouded by a larger investment burden and persistent losses at Reality Labs.
Meta Rebounds After a Shaky Run
Meta entered the final quarter of 2025 under growing scrutiny, with investors increasingly questioning whether its evolving strategy would translate into sustained earnings growth. That uncertainty weighed on the stock, which slid nearly 20% from recent highs before stabilising at key long-term technical support near the 100-week moving average.
Meta Stock Chart Daily – The 200 SMA Held As Support
The earnings release provided some relief. Shares rebounded more than 8% in after-hours trading, lifting the stock toward $739 and pushing it back above the 50-week moving average, which had been acting as resistance. The bounce opens the door to a retest of prior highs near $800, though conviction remains measured.
Headline Beat Driven by Advertising Strength
Meta delivered a solid fourth-quarter performance, beating expectations on both earnings and revenue. Adjusted earnings per share came in at $8.88, well above the $8.19 consensus forecast and higher than $8.02 a year earlier. Revenue reached $59.89 billion, surpassing expectations of $58.42 billion.
The results underline the resilience of Meta’s core business. Advertising demand remained robust despite ongoing macro uncertainty, reaffirming the company’s ability to monetise its vast user base across platforms such as Facebook, Instagram, and WhatsApp.
Family of Apps Anchors Performance
Advertising revenue totalled $58.14 billion, topping the $56.79 billion forecast. The Family of Apps segment continued to do the heavy lifting, generating $58.94 billion in revenue and $30.77 billion in operating income—both ahead of market estimates.
Overall operating income rose 5.9% year-on-year to $24.75 billion, reflecting the benefits of cost discipline and efficiency measures implemented over the past year. These improvements helped offset ongoing spending in newer growth areas and reinforced confidence in Meta’s near-term earnings power.
Reality Labs Losses Remain a Drag
While Meta’s core platforms performed well, Reality Labs continued to weigh on group profitability. The division posted revenue of $955 million, slightly below expectations, while operating losses widened to $6.02 billion, exceeding the projected $5.8 billion loss.
The growing losses underscore the cost of Meta’s long-term bets on virtual reality, augmented reality, and immersive computing. Although management continues to frame these investments as strategic, they remain a source of concern for investors focused on near-term margins and returns on capital.
Upbeat Near-Term Guidance Offsets Some Concerns
Looking ahead, Meta surprised on the upside with its first-quarter revenue outlook. The company guided Q1 revenue to a range of $53.5 billion to $56.5 billion, well above the Street’s $51.27 billion estimate. The guidance suggests advertising momentum is carrying into early 2026, offering reassurance after recent market volatility.
However, the longer-term investment picture became more demanding. Meta raised its 2026 capital expenditure outlook to $115 billion–$135 billion, above consensus expectations. The higher forecast reflects stepped-up spending on AI infrastructure and data centres, signalling a heavier cost base in the years ahead.
Conclusion: Growth Intact, but Trade-Offs Persist
Meta’s fourth-quarter results reaffirm the strength of its advertising franchise and provide solid near-term visibility through stronger-than-expected guidance. At the same time, widening Reality Labs losses and a sharply higher capex outlook highlight the trade-offs embedded in Meta’s long-term strategy.
For now, earnings momentum supports the stock’s rebound, but enthusiasm may remain restrained as investors weigh durable revenue growth against rising capital intensity and pressure on margins.
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