Meta's February 2026: Will the AI Execution Close the $135B Capex Expectation Gap?

Meta's fourth-quarter results were a textbook beat, but the market's reaction showed they were already priced in. Revenue came in at $59.89 billion, crushing the consensus of $58.3 billion. Earnings per share hit $8.88, well above the $8.16 forecast. This strong narrative reset powered the stock to a peak near $744 in late January. Yet, even as the numbers were fresh, the focus had already pivoted. The stock has since pulled back to around $670, a clear signal that the positive surprise was absorbed. The expectation gap had shifted from the past quarter to the massive capital expenditure needed to fund its AI future.

The new, defining challenge is the unprecedented $115 billion to $135 billion in capital expenditures Meta plans for 2026. This guidance, announced alongside the Q4 report, represents an 87% jump from the $72.2 billion spent in 2025. The beat was good news, but the capex plan is the real story now. It's the cost of building a sovereign AI compute infrastructure, a total strategic realignment from the metaverse dream. For the market, the question is no longer whether Meta can execute on its current business, but whether the returns from this massive investment will justify the financial toll. The Q4 beat set a high baseline, but the 2026 capex figure is the new, towering expectation that must be met.

The AI Execution Narrative: From Reset to Rollout

The market's expectation gap isn't just about spending; it's about proof. Meta's $135 billion capex plan is a promise of future returns, but the narrative now hinges on execution. The company's recent moves are the first tangible steps to close that gap, testing whether its internal reset translates into real products.

Last year's AI setback created a cautionary reset. The delayed launch of its Llama model left a gap in the market narrative, making investors wary that Meta's hype might not match its delivery. In response, CEO Mark Zuckerberg announced a major internal AI reset, shifting the company's focus from preparation to execution. As he stated on the latest investor call, Meta spent much of last year rebuilding its AI foundations, and now it's ready to roll out new AI models and products "over the coming months". This pivot is the core of the new expectation: the company is moving from lab work to product rollout.

The debut of the "Dear Algo" feature on Threads is a concrete, early signal of this shift. This tool, which lets users personalize their content feeds with simple prompts, is a direct step toward integrating AI into core user experiences. It's a tangible product that demonstrates Meta's ability to move quickly and incorporate AI into its apps, a capability Zuckerberg highlighted as a key advantage. The feature's rollout is a small but important beat against the expectation that Meta's AI progress would be slow or stalled.

Yet, the market's skepticism remains. The reset narrative was born from a delay, and now the company must prove it can consistently deliver. The Dear Algo launch is a promising start, but it's a single feature. The real test is whether this execution momentum can scale across Meta's ecosystem, driving the user engagement and revenue growth needed to justify the massive 2026 capital outlay. For now, the feature closes a small part of the expectation gap, but the larger question of sustained, impactful AI rollout is still open.

The Capital & Regulatory Overhang: The Real Expectation Gap

The market has priced in Meta's AI ambition, but the real expectation gap now lies between that promise and the harsh realities of funding it and navigating a storm of regulation. The company's plan to spend up to $135 billion in 2026 is a staggering commitment that creates a massive cash burn expectation. This isn't just a budget line; it's a direct bet that future AI-driven growth will be so explosive that it justifies this unprecedented outlay. The market must now weigh the potential payoff against the tangible cost of capital, a key uncertainty for the stock's trajectory.

Regulatory headwinds are mounting, adding another layer of risk that could widen the gap. In the EU, the antitrust battle is heating up, with the European Commission sending a statement of objections and signaling it may impose interim measures to stop Meta from blocking rival AI assistants on WhatsApp. This is a direct attack on Meta's ability to control its own ecosystem for AI distribution, a core part of its strategy. The threat of fast interim remedies increases near-term uncertainty and could force product changes or fines, weakening the very advantage the capex is meant to build.

Simultaneously, legal exposure in the US remains elevated. High-profile trials in New Mexico and Los Angeles have begun, with opening arguments focusing on allegations of addictive design and child-safety failures. Unsealed documents have amplified reputational risk, and the proceedings keep downside potential elevated. These regulatory and legal overhangs create a tangible drag on the company's operational freedom and financial outlook, even as it commits to massive investment.

The bottom line is that Meta's narrative is now a high-stakes balancing act. The market is being asked to believe that AI monetization will eventually justify a $135 billion capital expenditure, while also navigating a complex web of regulatory and legal challenges. For now, the expectation gap isn't about whether Meta can spend-it's about whether it can spend that much and still deliver the returns the stock is priced for, all while avoiding a costly regulatory backlash.

Catalysts and What to Watch in February

The thesis now hinges on near-term execution. The $135 billion capex plan is a promise; February will provide the first real-world tests of whether Meta can deliver the returns that justify it. The primary catalyst is the rollout of its AI products. Watch user engagement metrics on the newly launched "Dear Algo" feature on Threads. This is the first major test of Meta's ability to integrate AI into its core apps in a way that drives stickiness. The feature's uptake will signal whether the company's internal reset is translating into tangible product momentum, a key step in closing the expectation gap.

A separate product catalyst with significant implications is the planned rollout of facial recognition for its smart glasses. The feature, internally called "Name Tag," is slated for release as soon as this year. Its debut would be a bold move, bringing back a controversial technology Meta previously shut down. The company's internal planning notes suggest it sees political tumult in the United States as good timing for the launch, highlighting the high-stakes nature of the decision. Any update on this feature will be a major signal. It could demonstrate Meta's aggressive product philosophy, but it also carries substantial privacy and regulatory risk, which could trigger a backlash or regulatory pushback.

The key risk for the stock remains a guidance reset. Any hint that the massive 2026 capital expenditure plan is too aggressive, or that regulatory fines are looming, could trigger a sharp valuation re-rating. The EU antitrust battle is heating up, with the European Commission signaling it may impose interim measures to stop Meta from blocking rival AI assistants on WhatsApp. If Meta is forced to alter its strategy or faces significant penalties, it would directly challenge the return profile of its AI investments. Similarly, any stumble in the Dear Algo adoption or a delay in the smart glasses feature could feed into a narrative that Meta's execution is lagging, pressuring the stock despite its strong fundamentals.

For now, the setup is clear. February offers a trifecta of catalysts: product execution, a high-profile feature launch, and the looming threat of a regulatory or financial reset. The market will be watching for any data point that confirms Meta is moving from a $135 billion promise to a $135 billion payoff.