ZACKS·2026-01-27 08:01Core Viewpoint - Meta Platforms is expected to report strong fourth-quarter 2025 results driven by advertising revenue growth, despite challenges from rising expenses and losses in its Reality Labs division [2][5][10]. Financial Performance Expectations - Meta anticipates total revenues between $56 billion and $59 billion for Q4 2025, with a Zacks Consensus Estimate of $58.40 billion, reflecting a 20.7% increase year-over-year [2][3]. - The consensus estimate for earnings per share is $8.15, indicating a 1.6% growth from the previous year [3]. Advertising Revenue Growth - The advertising revenue for Q4 2025 is projected at $56.85 billion, suggesting a 21.5% year-over-year growth, driven by increased advertiser spending and improved AI capabilities [5]. - Meta's platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads, reach over three billion users daily, contributing to its significant share of the digital ad market [6]. AI and User Engagement - Meta is leveraging AI to enhance user experience and engagement, with over one billion users currently utilizing Meta AI [7][8]. - The company’s AI-powered ad tools have an annual run rate exceeding $60 billion, indicating strong demand and effectiveness in ad targeting [5]. Financial Challenges - Rising expenses related to AI development and Reality Labs are expected to pressure profit margins, with the operating income for the Family of Apps estimated at $29.78 billion, a 5.1% year-over-year increase [9]. - Reality Labs is projected to incur a loss of $6.31 billion in Q4 2025, wider than the previous year's loss of $4.97 billion [10]. Stock Performance and Valuation - Meta shares have decreased by 0.2% over the past year, underperforming the Zacks Computer & Technology sector, which has appreciated by 28.4% [11]. - The current valuation of Meta is considered stretched, with a forward price/sales ratio of 6.98X, higher than the industry average of 4.58X [12]. Capital Expenditure and Future Outlook - Meta's capital spending for 2025 is expected to be between $70 billion and $72 billion, reflecting increased investment in AI and infrastructure [14]. - Despite the potential long-term benefits of these investments, the company faces challenges from a competitive ad market and regulatory issues [15][16].