Quick Read
- Meta Platforms’ stock price fell approximately 10% in a week after an initial surge following its Q4 earnings report.
- The company reported robust Q4 revenue of $59.9 billion (24% YoY growth) and EPS of $8.88, both exceeding forecasts.
- Meta plans massive AI investments, projecting $115-$135 billion in capital expenditure for 2026, up from $72 billion in 2025.
- Q4 costs and expenses surged 40% year-over-year, squeezing operating margins despite strong revenue growth.
- Hedge fund Alecta Pensionsforsakring, Omsesidigt boosted its stake in Meta Platforms by 180,000 shares.
YEREVAN (Azat TV) – Meta Platforms Inc. (META) has experienced a significant stock price pullback, falling approximately 10% in the week following a strong surge that came after its better-than-expected fourth-quarter earnings report. This decline, which coincides with a broader market retreat for software and AI-focused companies, presents investors with a critical juncture: weighing the social media giant’s robust financial performance against its aggressive, multi-billion dollar investment strategy in artificial intelligence.
The stock’s recent volatility saw it give back all gains made since its January 29th post-earnings close, raising questions about whether this dip offers a new buying opportunity or signals investor caution regarding Meta’s long-term spending commitments.
Meta’s Robust Q4 Performance and Strong Outlook
Despite the recent stock decline, Meta Platforms delivered an impressive fourth-quarter performance that largely surpassed analyst expectations. The company reported a revenue of $59.9 billion, marking a 24% year-over-year increase and comfortably exceeding the consensus forecast of $58.5 billion. Earnings per share (EPS) also outperformed, reaching $8.88, significantly higher than market predictions.
The underlying health of Meta’s core platform ecosystem remains strong, with daily active users across all its platforms growing 7% year-over-year to 3.58 billion. This robust user engagement and expanded scale fueled an 18% year-over-year increase in ad impressions during the fourth quarter. Looking ahead, management’s outlook for the first quarter of 2026 suggests continued strong growth momentum, with revenue guidance midpoint indicating a 30% year-over-year growth rate. Even when excluding a roughly 4% positive impact from foreign exchange rates, growth is projected to reach 26%, signifying an acceleration from the previous quarter.
Massive AI Investments Squeeze Profitability
The impressive top-line growth, however, comes with a substantial price tag. Meta is currently in a high-intensity investment cycle, primarily driven by its ambitious pursuit of artificial intelligence. Fourth-quarter costs and expenses surged by a notable 40% year-over-year, which significantly compressed profit growth. The operating margin fell from 48% in the same period last year to 41%, and earnings per share grew by only 11% year-over-year, less than half the rate of revenue growth.
Meta Founder and CEO Mark Zuckerberg explicitly stated during the earnings call that the company is ‘witnessing a significant acceleration in AI development, and we expect this wave to further accelerate across multiple frontiers in 2026.’ To capitalize on this AI opportunity, Meta has projected staggering capital expenditures for 2026, ranging from $115 billion to $135 billion, a substantial increase from approximately $72 billion in 2025. Similarly, the full-year expense guidance for 2026 is set between $162 billion and $169 billion, considerably higher than the approximately $118 billion in 2025. These figures underscore the company’s deep commitment to becoming a leader in the AI space, even if it means short-term pressure on profit margins.
Investor Sentiment and Market Reactions to Meta’s Strategy
The recent 10% decline in Meta’s stock price reflects a broader market pullback that saw the tech-heavy Nasdaq Composite Index fall approximately 3.5%. This selling pressure has affected many software and AI-focused companies, suggesting a general reassessment of valuations following recent surges. Despite this, some institutional investors appear to be viewing the dip as an opportunity. Alecta Pensionsforsakring, Omsesidigt, a notable hedge fund managed by Magnus Billing, recently increased its position in Meta Platforms by 180,000 shares, signaling confidence in the company’s long-term prospects.
Financial analysts are also providing mixed, yet generally positive, assessments. TipRanks’ AI Analyst ‘Spark’ has given Meta Platforms an ‘Outperform’ rating, citing strong profitability and cash generation as primary drivers. However, this positive outlook is tempered by observations of rising leverage, signs of moderating growth, and a somewhat expensive valuation with a very low dividend yield. Spark’s analysis also highlights the significant planned 2026 expense and capital expenditure ramp, alongside ongoing losses from Reality Labs, as key execution risks that could impact future performance.
For long-term investors, the current pullback in Meta’s stock price presents a nuanced decision, requiring a clear alignment with Mark Zuckerberg’s ambitious AI vision. While the immediate impact of massive investments is a suppression of profit margins, the company’s strategic bet on artificial intelligence is positioned as a foundational element for future growth and competitive advantage in the evolving digital landscape.