2025 was a tough year for the stock of Meta Platforms (META 1.34%). Like many other top artificial intelligence (AI) companies, the social media company benefited from its AI initiatives; however, its stock performance badly lagged the market.
That said, its stock underperformance had nothing to do with its operational performance throughout the year. The company grew its revenue by a robust 22% in 2025 to $201 million, with its Q4 revenue growth even stronger, coming in at 24%. Meanwhile, Meta sees no sign of its growth slowing down, with the company forecasting its revenue growth will accelerate in Q1 to between 26% to 34%.
Image source: Getty Images.
AI powers Meta's ad revenue growth
Meta has been using AI to improve its recommendation algorithm to keep users on its sites longer, which is leading to more opportunities to serve ads. At the same time, the company has developed a generative ads recommendation model (GEM) that can bring together a user's engagement across Meta's platforms to deliver more personalized ads. Meanwhile, it has started using sequence learning, which takes into account the order of users' interactions to help recognize a high intent to purchase. For example, if within a two-day period a user searched for "Yellowstone National Park," watched a Reel on photography, and then read an article on the best lens for landscape photography, AI could identify that this user has a high intent to buy a camera lens for an upcoming trip. Retailers that sell photography equipment and camera equipment brands could then bid more aggressively and even tailor ads specifically for that user.
Combined, this is leading to strong revenue growth for Meta, with both ad impressions and pricing climbing. Meanwhile, the better it gets at these initiatives, the more revenue growth it can drive. Meta is also just starting to introduce ads to its WhatsApp messaging platform and its new social media site, Threads. It's still rolling out ads gradually to these platforms, but this is a big long-term opportunity.
NASDAQ: META
Key Data Points
Time to buy Meta stock?
While Meta has been growing its revenue briskly, the stock underperformed in 2025, largely due to its spending. However, the company is not backing down on its planned investments due to its stock underperformance. In fact, it plans to be even more aggressive this year, nearly doubling its capital expenditure to a range of $115 billion to $135 billion for 2026. While that would seem like a recipe for another year of underperformance, its spending is shifting more toward AI, where it has seen strong returns on its investments, while it's recalibrating its metaverse spend toward AI-integrated hardware, like smart glasses. That's a big positive.
I like to see a company with conviction, and Meta isn't letting its stock underperformance last year affect its decisions, instead focusing on the long term. Attractively valued, trading at a forward price-to-earnings (P/E) ratio of under 25 times 2026 analyst estimates and with strong growth ahead, this is a stock poised to bounce back in 2026.
