While many companies are looking for ways to profit from artificial intelligence (AI), Meta Platforms (META 0.43%) has flipped the narrative on its head. The company has long used sophisticated algorithms to surface relevant content and direct targeted advertising to users of its social media platforms. The advent of generative AI has taken that approach to the next level.
When Meta reported its quarterly results after the market close on Wednesday, one thing was crystal clear. The company continues to stick to the strategy that fueled its success while also looking for ways to profit from an AI-centric future.
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The numbers tell the tale
For the fourth quarter, Meta generated revenue that grew 24% year over year to $59.9 billion. This fueled diluted earnings per share (EPS) of $8.88, which increased 11%. For context, analysts' consensus estimates were calling for revenue of $58.47 billion and EPS of $8.22, so Meta sailed past Wall Street's expectations.
The results were fueled by Meta's social media audience, with daily active users of 3.58 billion, up 7% year over year. This ever-growing user base is Meta's target market for digital advertising, which generates the lion's share of its revenue.
CEO Mark Zuckerberg revealed that Meta has been reaping the benefits of its foray into AI. In the fourth quarter, ad impressions climbed 18% year over year, driving the average price per ad up 6%.
Zuckerberg said the company plans to lean into its AI-driven success. In 2026, Meta is planning to spend between $115 billion and $135 billion on capital expenditures (capex), primarily on AI infrastructure.
Meta's ability to scale down its Llama large language models (LLMs) to smaller AI systems for targeted advertising has been tremendously successful, boosting user engagement and making its adtech business even more profitable. This is a prime example of getting a great return on investment (ROI), the holy grail of AI spending.
NASDAQ: META
Key Data Points
Another development that was music to the ears of shareholders was comments from CFO Susan Li. Meta has been pouring money into Reality Labs, which serves as the hub for the company's metaverse, smart glasses, and other augmented reality and virtual reality products.
Li noted that full-year losses for Reality Labs in 2026 will be "similar to 2025 levels." After funneling more than $19 billion into the segment last year, investors were pleased to hear that things wouldn't be getting any worse.
Perhaps as importantly, Meta is predicting that its growth streak will continue. For the first quarter, management's forecast is calling for revenue of $55 billion at the midpoint of its guidance. That would represent year-over-year growth of 30%. That was well ahead of Wall Street's expectations of $51.4 billion.
Meta continues to be one of the clearest examples of using AI to boost results in near real time. At the same time, the company is investing in building out its infrastructure, which will support its growth over the coming decade.
Finally, with a price-to-earnings (P/E) ratio of less than 30, Meta offers a common-sense, low-risk way to profit from the AI revolution.
