Tech Corner: META's Big AI Spend

Core Insights - Meta Platforms is the world's largest social media company with a significant advertising-based business model, encompassing platforms like Facebook, Instagram, Messenger, and WhatsApp [1][2] - The company is heavily investing in artificial intelligence to enhance ad targeting and user engagement, with advertising accounting for 95% of total revenue [3][5] Financial Performance - In Q4 2025, Meta reported revenues of approximately $59.89 billion, a 24% year-over-year increase, and earnings per share (EPS) of $8.88, surpassing estimates by $0.66 [6][7] - R&D expenses reached over $17 billion in Q4, up nearly 41% year-over-year, impacting net profit despite revenue growth [8] - Average revenue per user increased by 16% year-over-year, with daily active users rising to about 3.58 billion, a 7% increase [9][10] Market Position and Competition - Meta faces competition from major players like Alphabet (Google), TikTok (ByteDance), Microsoft (LinkedIn), and Amazon in digital advertising and AI development [4][5] - The company's unique value proposition lies in its extensive ecosystem of interconnected apps, which enhances user engagement and monetization [5] Capital Expenditures and AI Investments - Meta's capital expenditures are projected to be between $162 billion and $169 billion in 2026, reflecting aggressive investments in AI infrastructure [10][12] - The company's AI initiatives are expected to drive future growth and improve ad performance, contributing to a robust advertising business [11][13] Profitability Metrics - Meta maintains a gross margin of around 82%, significantly higher than the sector median of approximately 54%, and a net income margin close to 31% [15][16] - Despite high capital expenditures, the company remains profitable and is expected to grow sales by approximately 19% over the next four quarters [14][20] Technical Analysis - Meta's stock has shown strong momentum with year-to-date gains of over 9%, indicating bullish sentiment among investors [18][19] - The stock is trading above both the 100 and 200-day moving averages, suggesting improved technical conditions [19] Long-term Outlook - Analysts expect positive returns for investors as Meta continues to leverage its AI capabilities for monetization and user engagement [21][20] - The company is positioned to maintain its dominance in the social media industry while expanding its global influence [21]