Ignore Meta's huge losses in the metaverse! Meta is aggressively deploying AI, and the Q4 financial report is sending a key signal: does high investment equal high growth?

Meta Platforms (META.US) announced its fourth quarter and full-year financial results for the fiscal year 2025 on January 28th, surpassing Wall Street's expectations. According to the financial report, benefiting from AI-driven advertising efficiency improvements, Meta achieved revenue of $59.89 billion in the quarter, a significant increase of 24% year-over-year; earnings per share (EPS) reached $8.88, surpassing market expectations of $8.21. The full-year revenue for 2025 exceeded $200 billion for the first time, reaching $200.97 billion. The company's capital expenditures for the full year of 2025 reached $72.2 billion. In terms of core business, Meta's Family of Apps showed strong user engagement in the quarter. Daily active people (DAP) increased to 3.58 billion, a 7% year-over-year growth, and AI-powered ad recommendation algorithms led to an 18% increase in ad impressions and a 6% increase in unit prices. Meta CEO Mark Zuckerberg emphasized during the performance meeting that the company is moving towards the era of "personal superintelligence" by deeply integrating generative AI into advertising systems and wearable devices. Zuckerberg has been actively pushing for accumulating the necessary infrastructure, computing power, and talent to win in the competitive AI race. He stated that his core strategy is to "pre-deploy" computing power to prepare for the company's superintelligence goals; superintelligence is a theoretical milestone where artificial intelligence will reach or surpass human levels in many tasks. However, the continuously growing expenditure remains a focus for the market. Meta provided a highly expansive capital expenditure guideline in the financial report, expecting capital expenditures for 2026 to reach between $115 billion and $135 billion, significantly higher than the market expectation of around $110.6 billion. These funds will mainly go towards expanding ultra-large-scale data centers and purchasing high-end computing chips to support the increasing demand for AI model training and inference. Looking ahead, Zuckerberg publicly promised to invest $600 billion in the US by 2028 to support artificial intelligence technology, infrastructure development, and workforce expansion. Last October, Meta CFO Susan Li stated that the company's capital expenditures for 2026 were expected to be "significantly higher" than in 2025, primarily due to increased infrastructure costs. This statement raised concerns among some investors, and on the day Meta released its third-quarter financial report, its stock price dropped by more than 11% in a single day. Investors have long been concerned about whether Meta's business can generate substantial returns from such large investments. Bloomberg Intelligence analyst Mandip Singh stated in a report last week that compared to cutting-edge large language models, Meta's lack of model capabilities creates uncertainties about the monetization prospects of its artificial intelligence investments, similar to large-scale cloud services providers. However, artificial intelligence has accelerated the growth of Meta's advertising business. Meanwhile, Reality Labs, responsible for the metaverse and hardware development, recorded an operating loss of $6.02 billion in the fourth quarter and a cumulative loss of nearly $19.2 billion for the full year, demonstrating that its cutting-edge technology research and development are still in a high investment, low return phase. Although the department achieved sales of $955 million in the fourth quarter, the trend of sustained losses continued. Meta CFO Susan Li explicitly stated that the department is expected to continue facing similar scale loss challenges in 2026. Earlier this month, Meta laid off approximately 10% of the employees in the Reality Labs department, aiming to reallocate resources from some virtual reality products to focus more on AI-driven businesses, including its AI wearable devices like the Ray-Ban Meta glasses. In terms of market reaction, despite concerns from some investors about profit margins being diluted due to the high expenditure guidance, Meta's stock price rose over 7% in after-hours trading, benefiting from the better-than-expected revenue performance and optimistic guidance for continued growth in operating profit in 2026. Currently, Meta is in a beneficial cycle of "profits nurturing computing power," catching up with the AI wave with cash flow generated from its core advertising business. As the company further expands into the AI assistant and new smart glasses market in 2026, the balance between capital expenditures and profitability will continue to influence its long-term valuation trends.