Meta Platforms' AI Investments Drive Strong Q4 Results and Future Growth Plans

Meta Platforms' Revenue Jumps as It Plans to Invest Big in AI. Is the Stock a Buy?

Meta Platforms' (META 0.32%) share price rose after the social media company released strong fourth-quarter results, once again showing that its social media sites are top destinations for both users and advertisers. The company also remained committed to spending big on artificial intelligence (AI). The stock has been off to a fast start in 2025, with its shares already up 17% as of this writing. Let's examine Meta's Q4 earnings and guidance to see if its stock is still a good investment. AI is helping power results Meta turned in another great quarter to close out 2024, with revenue climbing 21% year over year to $48.4 billion. Advertising revenue was also up 21%, coming in at $46.8 billion. Revenue at Reality Labs, which is home to Meta's metaverse efforts and its augmented reality headsets and smart glasses, edged up 1% to $1.1 billion. Operating income from its social media apps surged 35% to $28.3 billion, though Reality Labs generated a loss of $5 billion. Earnings per share (EPS) soared 50% year over year to $8.02. The results easily topped the analyst consensus, as compiled by LSEG, for revenue of $47 billion and EPS of $6.77. Family daily active people (DAP), a measurement of registered users who log in to one of Meta's apps on a daily basis, rose 5% year over year to 3.35 billion in December; that was just above analyst expectations for 3.32 billion. Family average revenue per person (ARPP), meanwhile, jumped nearly 16% to $14.25. Ad impressions increased 6% year over year, while the average price per ad jumped 14%. This shows that Meta is continuing to add more users and continuing to better monetize its user base, by serving them more ads and being able to charge more to advertisers. This stems from increasing advertiser demand driven by ad performance. Meta's newest app Threads reached 320 million monthly active users at year-end, and the platform continues to add about 1 million users a day. The company plans to introduce ads gradually to the platform, but it won't be a meaningful contributor this year. Looking ahead, Meta forecasts first-quarter revenue to be between $39.5 billion and $41.8 billion, for growth of 8% to 15% year over year. The midpoint of $40.7 billion was below the $41.7 billion analyst consensus. Meta forecast full-year 2025 capital expenditures to range from $60 billion to $65 billion, which is a big jump from the $39.2 billion it spent in 2024. Much of this will be directed toward increasing AI capacity and data center expansion; the company believes that building out its own AI infrastructure will be a strategic advantage. Currently, 700 million people actively use Meta AI each month, and it expects this to reach 1 billion users this year. Founder and CEO Mark Zuckerberg expects Meta AI to become the world's leading AI assistant. He noted that the Llama large language model (LLM) is reaching scale; he sees the newest version, Llama 4, as being transformative, having both agentic AI and multimodal features. In addition, the company is investing in custom AI chips for specific workloads to improve efficiency. Is it time to buy Meta stock? Despite the news regarding DeepSeek and what it might mean for spending on AI and advanced semiconductor chips, Zuckerberg has said Meta is not backing down from its AI spending plans. He thinks investing in AI infrastructure will be a big advantage, both in the quality of the service and in being able to achieve the scale it wants to reach. He said that everyone could learn that this investing isn't an advantage after all, but that it's way too early to say that now. Meanwhile, the company seems to have some pretty big plans with Llama 4. At the same time, Meta's core platforms are humming along, with both increased engagement for users and improved monetization. This quarter once again showed that Meta is one of the best companies at monetizing its user base through advertising. Just as important, it looks like it's in the process of building its next big platform with Threads. Zuckerberg has been a master of building audiences and then later monetizing them, so this is a big opportunity down the road. From a valuation perspective, Meta stock trades at a forward price-to-earnings (P/E) ratio of under 24, based on 2025 analyst estimates. Given its revenue growth of over 20% and its strong business model, that's a pretty attractive valuation. Data by YCharts. As one of the leading digital advertising companies in the world and one with big investments in AI, Meta Platforms is likely to remain a solid long-term winner. The company also continues to invest in the metaverse, which adds some optionality should that ever live up to Zuckerberg's vision.

What Analysts Think of Meta Stock Ahead of Earnings

On Friday, CEO Mark Zuckerberg unveiled plans to invest as much as $65 billion in capital expenditures this year as Meta expands its AI efforts. Meta Platforms (META) is set to report its fourth-quarter results after the closing bell Wednesday, with analysts largely bullish on the tech giant's ability to build on a strong 2024 as its AI investments show some signs of paying off. Meta's stock price rose by nearly two-thirds last year, "driven by revenue upside, strong cost discipline, and optimism on AI capabilities," Bank of America analysts said Thursday. The analysts added they "remain positive on the stock in 2025," given rising AI contributions to ad revenue, growing messaging revenue, and recent workforce reductions. BofA reiterated a "buy" rating and raised its price target for the stock to $710 from $660. Overall, 26 of the 28 analysts covering Meta tracked by Visible Alpha have a "buy" or equivalent rating, with the remaining two issuing "hold" ratings. Their consensus price target is about $686, a roughly 6% premium over the stock's record closing price Friday. Wall Street expects Meta to report fourth-quarter revenue of $47.02 billion, up 17% year-over-year. Earnings are projected to rise to $17.52 billion, or $6.75 per share, up from $14.02 billion, or $5.33 per share, a year earlier, even as Meta boosts spending on AI. On Friday, CEO Mark Zuckerberg unveiled plans to invest $60 billion to $65 billion in capital expenditures this year, up from an estimated $38 billion to $40 billion in 2024, as the tech giant expands its AI efforts. Jefferies analysts suggested last week the short-lived TikTok ban in the U.S. earlier this month could also be a "potential added tailwind" in the current quarter, citing conversations with teens that indicated the ban drove some TikTok users to Instagram Reels. Shares of Meta climbed 1.7% in Friday's session to close at an all-time high of $647.49, and have added close to 65% over the past 12 months.

Meta Earnings Preview: AI-Driven Ads, eCommerce Gains, And Capex Surprises Ahead? - Meta Platforms (NASDAQ:META)

Post highlights Meta's cost discipline, strong AI growth drivers, and attractive valuation with a $710 price target. BofA Securities analyst Justin Post maintained a Buy rating on Meta Platforms Inc META with a price target of $710. Post recently lowered his fourth-quarter estimates for recent US dollar appreciation and are now in line with Street for fourth-quarter revenue (Post's estimate of $47 billion) but above for EPS (Post's estimates of $7.05 versus Street's $6.75). Post's checks suggest Meta could benefit from eCommerce sales and strength in shopping ads, improving AI models for ad targeting, and new CRM integration, which would drive higher ROI and ad spending. Also Read: Meta Wants To Leverage TikTok Ban Threat to Promote Instagram On Other Social Media, Offers Cash Deals Post remained below the Street on expenses. He also estimates fourth-quarter daily active people (DAP) at 3.32 billion versus 3.33 billion on the Street. DeepSeek traction and performance will likely be a key call topic given Meta's open-source focus and outsized capex growth in 2025. With a five-point tougher year-on-year ex-foreign exchange revenue growth comp in the first quarter, Post expects a deceleration in the revenue guide, which will also include FX pressure. The analyst expects a first-quarter revenue guide of $38 billion and $42 billion (up 4-15% Y/Y) versus Street's $41.8 billion. Investors Post spoke to expect additional FX pressure in the first-quarter revenue guide, and comps ease as the year progresses, so Street may be looking for any commentary suggesting stabling growth post first-quarter. For expenses and Capex, Meta announced plans to invest $60 billion-$65 billion in capex for 2025, focusing on enhancing AI infrastructure. Post noted the outlook was in line to slightly above expectations but has cleared some call uncertainty. With 2025 capex expected to be up $20 billion+ Y/Y, Post expects Meta to spend time on AI products and capex ROI on the call. Given recent news of 5% layoffs, ramping depreciation due to capex, and some FX savings, Post expects fiscal 2025 expense guidance at $108 billion-$113 billion (which compares to Street at $111 billion). Meta's AI-driven ad enhancements are expected to unfold over several quarters. For 2025, key growth drivers include: Expanding AI/ML capabilities to boost ad performance and spending Increasing short-form video usage and monetization Growing messaging revenues, and Monetizing platforms like Threads, Meta AI, and Marketplace. Additionally, Meta's advancing AI capabilities may lead to unexpected product innovations. At $647.49, Meta is trading at 22 times fiscal 2026E GAAP EPS. The stock is trading at 18 times fiscal 2026E EPS, which Post noted as attractive versus S&P at 20 times. Post-projected fourth-quarter 2024 revenue and EBITDA of $47 billion and $29.5 billion are in line and above Street at $47 billion and $28.4 billion. The analyst expects fourth-quarter EPS of $7.05, above Street at $6.76. Price Action: META stock is up 1.58% at $657.74 at the last check on Monday. Also Read: Taiwan Semiconductor's Capex Plans Boost These Chip Stocks, Jim Cramer Says Image: Shutterstock METAMeta Platforms Inc$649.110.25%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

2 No-Brainer AI Stocks to Buy With $1,000 in February 2025 | The Motley Fool

In 1996, Warren Buffett wrote, "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, ten, and twenty years from now." Put differently, when a stock with compelling growth prospects trades at a sensible price, the result is a no-brainer investment. Amazon (AMZN 1.30%) and Meta Platforms (META 0.32%) satisfy those conditions. Indeed, JPMorgan Chase analysts selected both stocks as top picks for 2025. And investors can buy a share of each company for less than $1,000. Here's why Amazon and Meta Platforms are smart long-term investments. Amazon has a strong presence in e-commerce, adtech, and cloud computing. It operates the largest online marketplace outside China, is the third-largest digital advertiser, and runs the largest public cloud in terms of sales. Few companies (if any) provide investors with better exposure to so many major secular trends. Importantly, Brian Nowak at Morgan Stanley recently chose Amazon as a top stock pick for 2025, calling the company an underappreciated leader in artificial intelligence (AI) across cloud computing and retail. Indeed, the company uses machine learning to optimize product recommendations, inventory allocation, and logistics. It also employs generative AI behind the scenes to assist programmers and customer service agents. Meanwhile, Amazon Web Services (AWS) is monetizing AI across every layer of its cloud platform: hardware, software, and services. Its custom AI chips for training (Trainium) and inference (Inferentia) provide cheaper alternatives to Nvidia's graphics processing units (GPUs). Its Amazon Q software automates coding and business intelligence workflows. And its Bedrock service lets clients develop generative AI applications. Amazon will report fourth-quarter financial results on Thursday, Feb. 6. Wall Street anticipates earnings will grow 49%, followed by 21% growth in 2025. That makes the current valuation of 50 times adjusted earnings look reasonable. But Amazon topped the consensus earnings estimate by an average of 39% in the last six quarters, and that pattern could continue as investments in AI boost revenue and operating efficiency. That makes Amazon a no-brainer buy. Meta Platforms owns four of the seven most popular social media platforms on the planet, an important competitive advantage that lets it collect data and target advertising content. Consequently, Meta Platforms is the second-largest adtech company in the world behind Alphabet's Google, and it's projected to gain share through 2026, according to eMarketer. Meta has invested heavily in artificial intelligence hardware and software, and on the fourth-quarter earnings call, CEO Mark Zuckerberg discussed the payoff. The company is saving money by using custom MTIA (Meta Training and Inference Accelerator) chips to handle ad recommendation inference workloads. Eventually, it plans to use its custom silicon for training workloads as well. Additionally, Meta AI had about 600 million monthly active users in December, making it the most popular conversational assistant in the world. Zuckerberg expects its user base to surpass 1 billion in 2025. "Once a service reaches that kind of scale, it usually develops a durable long-term advantage," he told analysts. Zuckerberg also expects the open-source Llama models to become "the most advanced and widely used AI models" in 2025. CFO Susan Li says Meta's capital expenditures may reach $65 billion in 2025, up 66% from $39 billion in 2024. That spending will be "driven by investments to support both generative AI efforts and our core business," she told analysts. That's good news for Nvidia in the wake of the DeepSeek disruption but also good news for Meta. Portfolio manager Dan Niles recently told CNBC that Meta is using AI better than other "Magnificent Seven" companies. Wall Street expects Meta's earnings to increase by 6% in 2025. That consensus makes the current valuation of 29 times earnings look expensive, but I expect analysts will revise their estimates higher throughout the year. I say that because digital ad spending is forecast to increase 11% in 2025, and Meta beat the consensus estimate by an average of 13% in the last six quarters. Upward revisions to earnings estimates tend to drive price appreciation, which makes Meta a no-brainer buy.