Meta Q4 2025 Earnings: The $135 Billion Bet

Meta Platforms (META) concluded 2025 with a financial performance that continues to impress, and then simultaneously issued a spending forecast for 2026 that is breathtaking in its scale. Mark Zuckerberg and Susan Li detailed a company that has successfully integrated AI into its core advertising business while preparing to spend more on infrastructure in a single year than most S&P 500 companies are worth in their entirety.

Q4 2025: A Resounding Beat Against Guidance

Meta’s fourth-quarter results were nothing short of stellar, consistently outperforming the high end of management’s own expectations.

• Revenue: Meta reported Q4 revenue of $59.89 billion, a 24% year-over-year increase. The Q4 results significantly beat the upper end of their previous guidance range of $54–$57 billion and was more than a billion north of market estimates.
• Earnings Per Share (EPS): Diluted EPS came in at $8.88, an 11% increase from the $8.02 reported in Q4 2024.
• Net Income: Quarterly net income reached $22.77 billion, demonstrating the immense cash-generation power of the Family of Apps (FoA) segment.

For the full year 2025, Meta crossed a historic milestone, reporting total revenue of $200.97 billion, up 22% from 2024 showing that Q4 is actually accelerating. Despite a massive one-time tax charge in Q3 related to the One Big Beautiful Bill Act, the company managed a full-year net income of $60.46 billion. Despite high capex, free cash flow was still $43.5B and allowed the company to continue to buy back their own shares prior to Q4 although buybacks paused this quarter as AI investments took precedent.

What’s Going Well: The AI Tailwind in Advertising

The primary driver of this success is Meta’s successful year of efficiency transitioning into a year of AI performance. Zuckerberg noted that AI-driven performance gains helped capture record-breaking holiday demand.

1. Monetization Efficiency: CFO Susan Li highlighted that in the second half of 2025, efforts to redistribute ads across users delivered a revenue impact 4x larger than simple ad load increases. This suggests Meta is getting better at showing the right ad at the right time, rather than just more ads.
2. Model Advancements: The deployment of the GEM (Generative Entity Model) for ads ranking and the Lattice model unification efforts have yielded measurable results. In Q4, GEM and sequence learning improvements drove a 3.5% lift in ad clicks on Facebook and over 1% gain in conversions on Instagram.
3. Video and Reels: Instagram Reels watch time increased more than 30% year-over-year in the U.S. Furthermore, 75% of Instagram recommendations now come from original posts, a critical metric for platform health.
4. WhatsApp Monetization: Paid messaging on WhatsApp has officially crossed a $2 billion annual run rate, proving that the messaging giant is finally becoming a meaningful financial contributor.

What’s Going Poorly: The Regulatory and Metaverse Weight

Despite the high-flying numbers, two primary anchors remain on Meta’s balance sheet and future outlook.

1. Reality Labs Losses: While Zuckerberg is pivoting the narrative toward AI glasses (noting sales tripled last year), the financial reality of Reality Labs (RL) remains grim. The segment lost $6.02 billion in Q4 alone, and $19.19 billion for the full year 2025. While revenue for RL was $1.08 billion in Q4, it actually declined 12% year-over-year.
2. Legal and Regulatory Headwinds: The company continues to face extreme scrutiny in the U.S. and EU. Management noted that several trials are scheduled for 2026 in the U.S. regarding youth-related safety issues, which may ultimately result in a material loss. Additionally, Meta is implementing changes to its less personalized ads offering in the EU to comply with the European Commission, which is expected to hinder ad performance in that region.
3. One-Time Tax Shock: Not a big negative but something that does impact how the numbers look. The full-year tax rate spiked to 30% (up from 12% in 2024). This was driven by a massive, non-cash income tax charge of $15.93 billion accrued in Q3 2025 related to the One Big Beautiful Bill Act. Excluding this charge, the annual rate would have been 13%.

2026 Guidance: The Infrastructure Shock

Revenue and Expenses

Meta expects Q1 2026 revenue between $53.5 billion and $56.5 billion which is higher than the $51.4B analysts expected. For the full year, total expenses are expected to be between $162 billion and $169 billion, driven primarily by infrastructure costs and technical talent.

The Growth Deceleration

CFO Susan Li explicitly warned that revenue growth for the full year 2026 is expected to be below Q1 levels. This deceleration is attributed to:

• Currency Tailwinds: The 4% tailwind expected in Q1 will likely dissipate as the year progresses.
• Lapping Performance: Meta will be lapping very strong year-over-year growth from 2025.
• EU Regulations: The rollout of revised less personalized ads in the EU will begin in Q1 and act as a headwind for the remainder of the year.

The CapEx Pivot

The most staggering figure in the report was the CapEx guidance.

• 2025 Actual CapEx: $72.22 billion.
• 2026 Guidance CapEx: $115 billion to $135 billion.

This massive step-up is aimed at supporting Meta Superintelligence Labs and building the compute capacity needed for Zuckerberg’s next vision: Personal Superintelligence. Susan Li noted that Meta will likely still be capacity constrained through much of 2026 despite this spending. This CapEx spend shows that the AI cycle is far from over and companies that benefit from this type of spending like NVDA, MU and others should continue to do well on the earnings front.

The AI Roadmap: From Models to Agents

Zuckerberg’s vision for 2026 is the shift from recommendation engines to Personal Superintelligence. He expects AI agents to become the primary way users interact with the platform.

• Agents: Meta is building agents that understand personal context, history, interests, and relationships, to tailor feeds and generate personalized content.
• Agentic Shopping: New tools will allow users to find specific products from businesses’ catalogs through conversational AI, significantly enhancing WhatsApp’s utility.
• AI Glasses: Zuckerberg believes we are at a smartphone moment for glasses. He expects most glasses in the future to be AI glasses, which can see what you see and hear what you hear.

This does seem like an interesting idea but it remains to be seen whether this will actually be a large revenue generator for the company or just a money sink like Reality Labs.

Management Q&A: Key Takeaways

The earnings call provided several critical insights into management’s thinking:

• Buyback Pause: Investors noted that Meta repurchased nil shares in Q4 2025. Susan Li clarified that the highest order priority is currently investing in AI leadership.
• Reality Labs Peak Losses: Zuckerberg teased that Reality Labs losses in 2026 would be similar to 2025 but suggested that 2026 might be the peak as they start to gradually reduce losses while focusing more on wearables.
• Infrastructure Flexibility: Management is exploring new ownership structures and joint ventures for data centers to manage the massive capital requirements.
• Operating Income Growth: Despite the $115B-$135B CapEx plan, Li stated that Meta expects to deliver 2026 operating income above 2025 levels, implying massive expected revenue growth. However, free cash flow could be negative given that high level of spend.

Valuation: Is META a Buy?

At the current run rate, Meta is a fascinating study in growth versus spending.

The Bull Case: With a 2025 EPS of $23.49 and a stock price likely trading in the $715 range after earnings, Meta trades at a P/E ratio of approximately 30x. For a company growing revenue at 22% for the year and promising higher operating income in 2026, this is arguably cheap compared to other Magnificent Seven peers.

The Bear Case: The 2026 CapEx guide of $115B-$135B is nearly double the 2025 spend. If the Personal Superintelligence vision fails to monetize at the same rate the infrastructure costs accrue, Meta risks a massive margin compression. Furthermore, the lack of buybacks in Q4 and the expected deceleration in revenue growth later in 2026 suggests caution.

Conclusion: Meta remains the most efficient monetization engine in the world. While the $135 billion CapEx figure is a sticker shock moment, Zuckerberg has a track record of being right on infrastructure outside of his investments in Reality Labs. For investors with a 3-5 year horizon, the current valuation makes sense. After all, you’re buying a company with 3.6 billion daily active users and one that monetizes them at a fantastic rate. It’s hard to say no to something like this when the valuation isn’t crazy.

Verdict: Moderate Buy on pullbacks, with a close eye on the Q1 and Q2 2026 margin trends. I own Meta and while I’m happy to hold, I’m not currently growing my position.

Disclaimer: I am long META, MU and may be long other stocks mentioned in this article in the near future. This article is for informational purposes only and does not constitute financial advice. Investors should perform their own due diligence or consult with a financial advisor before making any investment decisions.