Summary of Meta Platforms Inc. Earnings Call Company Overview - **Company**: Meta Platforms Inc - **Industry**: Internet - Large Cap / Mid & Small Cap Key Points and Arguments Revenue Growth and Financial Guidance - Meta aims for 2026 revenue growth in the 20% range, with 1Q26 revenue growth projected to be in the 30% range, indicating strong momentum [1][9] - Total expenses for 2026 are expected to be between $162 billion and $169 billion, which is higher than previous expectations [1][14] - Capital expenditures (capex) for 2026 are projected to be between $115 billion and $135 billion, also above prior estimates [1][14] AI and Advertising Improvements - Significant AI-driven ad improvements are expected to enhance engagement and monetization, with Instagram Reels watch time up over 30% year-over-year in the US [2][14] - Meta is seeing a 7% lift in organic feed and video posts on Facebook, contributing to the largest quarterly revenue impact from product launches in the past two years [2][14] - AI productivity improvements have led to a 30% increase in output per engineer, with power users of AI coding tools seeing an 80% year-over-year increase in output [14] Operating Income and EPS - Meta has established bottom-line guardrails with operating income growth projected for 2026, while Reality Labs operating losses are expected to remain similar to the previous year [1][9] - GAAP EPS for 2026 is projected to be $31.51, with a decrease of 3-4% in EPS estimates for 2026/2027 due to the removal of share repurchases [1][9] Frontier Model Development - Expectations for a frontier large language model (LLM) have been tempered, with emphasis on developing initial models that will be "good" rather than frontier-level in the first half of 2026 [1][9] - The timing for a frontier model may be pushed out, but the industry is rapidly innovating, with anticipation for new models in the coming months [1][9] Market Reaction and Valuation - Meta shares rose 7% in after-market trading following the earnings report, although some pushback is expected [1][9] - The price target for December 2026 has been raised from $800 to $825, based on a valuation of approximately 26 times the estimated GAAP EPS for 2027 [1][9] Financial Estimates - **2026 Revenue**: $252.26 billion, with a year-over-year growth of 25.5% [4][19] - **2027 Revenue**: $294.27 billion, with a year-over-year growth of 16.7% [4][19] - **Adjusted EBITDA for 2026**: $142.24 billion, with a margin of 56.4% [4][19] - **Free Cash Flow (FCF)**: Projected to be modestly positive at $5 billion for 2026 [1][9] Other Notable Insights - Meta's focus on AI and the Metaverse is expected to drive significant infrastructure investments, but the company has a strong track record of generating returns on increased spending [9] - The company is expected to self-finance its infrastructure investments in 2026 while also considering cost-efficient external financing [14] Conclusion Meta Platforms Inc. is positioned for strong revenue growth driven by AI advancements and advertising improvements, despite rising expenses and tempered expectations for frontier model development. The company maintains a positive outlook for 2026 and beyond, supported by a robust valuation and strategic investments in technology.