Meta shares jump 11% as strong Q4 revenue supports record AI spending

Core Viewpoint - Meta Platforms Inc. has provided a better-than-expected sales outlook, alleviating Wall Street's concerns regarding its significant spending plans on artificial intelligence (AI) for the year [1][2]. Financial Performance - Meta reported fourth-quarter sales of $59.9 billion, surpassing the expected $58.4 billion, indicating that its core business is growing faster than anticipated despite increased spending [8]. - The company forecasts first-quarter sales between $53.5 billion and $56.5 billion, exceeding the average analyst estimate of $51.3 billion [6]. Capital Expenditures - Meta plans to spend between $115 billion and $135 billion on capital expenditures in 2026, which is significantly higher than the $110.6 billion average analyst estimate and represents an approximate 87% increase from 2025's record spending of over $72 billion [4]. - CEO Mark Zuckerberg's strategy involves "front-loading" computing capacity to prepare for achieving superintelligence in AI [3]. AI Investment Strategy - Meta is aggressively investing in AI infrastructure, with Zuckerberg emphasizing a "major AI acceleration" and the release of new models and products following an overhaul of its AI program in 2025 [5]. - Despite concerns about the monetization of AI investments, Meta's advertising business is expected to support these initiatives by enhancing ad targeting and user engagement [6][7]. Reality Labs Performance - Meta's Reality Labs unit, focused on virtual reality and AI-enabled hardware, reported $955 million in fourth-quarter sales but incurred an operating loss exceeding $6 billion, contributing to total losses of over $19 billion for 2025 [13]. - Zuckerberg anticipates that losses from Reality Labs will stabilize this year, with expectations of gradual reductions in losses moving forward [14].