Meta Platforms (META 2.41%) has made some big changes since the early days of "the facebook." CEO Mark Zuckerberg even changed the name of the company a few years back to reflect the company's focus on augmented and virtual reality devices. More recently, however, the company has turned its focus to the massive opportunity presented by advances in artificial intelligence (AI), while pushing its metaverse efforts to the back burner.
While the business is constantly adapting to the changing tech environment, here are three things Meta investors need to know right now.
Image source: Getty Images.
1. Meta's AI budget just went to the moon
Meta warned investors back in October that it would take a big step up in its capital expenditures in 2026, but few expected it to announce plans to spend as much as $135 billion building out new data centers. That's an 87% increase from last year's capital spending.
That huge spend will support Meta's AI Superintelligence team, for which it spent huge sums of money (in cash and stock) to bring on board. That includes a $14 billion investment in Scale AI (acquiring a 49% stake) to bring on its founder, Alexandr Wang. With a full year of the Superintelligence Lab in operation, investors should expect higher personnel spending as well.
2. That AI budget is starting to weigh on profitability
With the growth of Meta's capital expenditures over the past few years, depreciation expense is starting to catch up with Meta. Depreciation increased 20% in 2025, and it'll likely increase even more in 2026 after the big step up in spending last year. The company's research and development expenses climbed 40% year over year in the fourth quarter, reflecting higher spending on personnel.
As a result, the company's operating margin shrunk from 48% in the fourth quarter of 2024 to 41% in 2025. Management reassured investors that, despite the pressure on its profit margin, it still expects to grow overall operating income in 2025. That's because....
3. There's still a lot of growth to come from artificial intelligence
Meta has been extremely effective at implementing its advancements in AI to fuel revenue growth. That enabled it to grow revenue 24% in the fourth quarter on the back of strong user engagement and steady ad price increases. But AI could fuel even better growth in the future.
Meta is just starting to integrate LLMs with its machine learning recommendation system. Zuckerberg sees the potential to provide content feeds that support users' goals instead of just focusing on their implied interests. That could make its apps even more engaging.
NASDAQ: META
Key Data Points
Meanwhile, generative AI could be instrumental in growing the number of advertisers on Meta's apps, making it easier to develop and test ad campaigns. Combined with more personalized content targeting and developing things like shopping agents in WhatsApp and Messenger, Meta could see a flood of ad revenue coming its way.
Meta is in a position to benefit from advances in generative AI more than almost any other company, and its spending is more than justified to help it do just that.
