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Meta Platforms' foray into hardware with AI glasses could potentially be another major growth avenue. However, Reality Labs continues to remain a drag on the company's finances. The segment posted an operating loss of over $6 billion in Q4. The segment also lost $19.1 billion last year, while cumulative losses since 2020 have topped $80 billion.Instagram Reels, which was launched to take on TikTok, continues to show strong traction as well. Meta said that, in Q4, total watch time on the platform rose 30% ye ...

Core Insights - Meta Platforms reported strong Q4 results, with revenue and adjusted EPS surpassing analyst estimates, leading to a surge in stock price [1][3] - The company has increased its capital expenditures for 2026 to a range of $115 billion to $135 billion, primarily for AI initiatives [2] - Despite concerns over capital expenditures, Meta's core business remains robust, with a 24% year-over-year revenue increase [3][4] Financial Performance - Q4 revenue reached $59.9 billion, an increase of 24% year over year, while adjusted EPS rose by 11% to $8.88, exceeding analyst expectations [3] - Advertising revenue also grew by 24% to $58.1 billion, driven by an 18% increase in ad impressions and a 6% rise in average price per ad [4][5] - Reality Labs revenue fell by 12% year over year to $955 million, with operating income from social media apps increasing by 9% to $30.8 billion [4] User Growth and Future Guidance - Family daily active people (DAP) increased by 7% year over year to 3.58 billion, indicating continued user growth [5] - For Q4, Meta guided revenue to be between $53.5 billion and $56.5 billion, reflecting a year-over-year growth of 26% to 34% [5] Valuation and Investment Outlook - Meta is trading at a forward price-to-earnings (P/E) ratio of around 24 times 2026 analyst estimates, positioning it as one of the cheaper megacap AI stocks [6] - The company's advertising growth is supported by advanced ad recommendation models and plans to expand ad monetization on platforms like WhatsApp and Threads [6] - Given its valuation and growth outlook, Meta is considered a stock to own for 2026, even after recent price increases [7]

Group 1 - Meta is laying off 10% of staff in its Reality Labs division, which has approximately 15,000 employees, potentially impacting over 1,000 people [1] - The company plans to shut down studios such as Armature Studio, Twisted Pixel, and Sanzaru, along with Oculus Studios Central Technology [2] - Job cuts will not affect employees working on augmented reality, as Meta aims to develop glasses and controllers, with savings from cuts allocated for AR development [3] Group 2 - Meta is shifting focus towards AI development, having moved metaverse head Vishal Shah to oversee AI products and reorganized to establish Superintelligence Labs [4] - The company is actively recruiting top researchers from other labs to enhance its AI capabilities [4] - Meta did not provide immediate comments regarding the layoffs and restructuring [5]

Core Insights - The division employs approximately 15,000 people and has a significant presence in the Seattle area, focusing on the company's metaverse technologies that integrate with augmented and virtual reality [1]

Core Insights - Meta plans to reduce its workforce by approximately 10% in the Reality Labs division, which focuses on products related to the metaverse [1] Group 1 - The layoffs will affect employees working on metaverse-related products [1] - The decision reflects ongoing challenges and strategic shifts within Meta's business operations [1]

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Core Viewpoint - Meta Platforms is highlighted as the second-best stock to buy among the "Magnificent Seven" for 2026, following a strong performance from the group of tech giants [2]. Group 1: Market Context - The "Magnificent Seven" includes Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla, all of which have shown significant returns, with four companies exceeding a market capitalization of $3 trillion [1]. - The S&P 500 could potentially gain over 20% for the third consecutive year, a feat not seen since the late 1990s, although the index is considered relatively expensive due to concentration in 20 companies [4][5]. Group 2: Meta Platforms' Position - Meta Platforms is not priced for perfection, making it more attractive compared to other growth stocks in the "Magnificent Seven," as it is slightly more expensive than the S&P 500 but less so than its peers [6]. - The company's earnings are primarily driven by advertising revenue from its Family of Apps, which includes Instagram, Facebook, Messenger, and WhatsApp, helping it maintain leadership in social media despite competition from platforms like TikTok [7]. Group 3: Growth Potential and Investments - Meta Platforms is heavily investing in AI to improve ad targeting, performance, and user engagement, alongside significant expenditures in its Reality Labs division focused on virtual reality and the metaverse [10]. - Despite concerns regarding increased spending on data centers and AI, the Family of Apps remains a strong revenue source that can support Meta's long-term investments [9].