Meta Platforms' Revenue Jumps as It Plans to Invest Big in AI. Is the Stock a Buy?

Meta Platforms Inc. (NASDAQ: META), the social media giant formerly known as Facebook, reported strong fourth-quarter earnings, with revenue climbing 21% year over year to $48.4 billion. The company's advertising revenue also grew by 21%, while its Reality Labs segment, which includes metaverse efforts and augmented reality headsets, saw a 1% increase in revenue. Meta's earnings per share (EPS) soared 50% year over year to $8.02, easily topping analyst estimates. The company's family daily active people (DAP) increased by 5% year over year to 3.35 billion in December, while average revenue per person (ARPP) jumped nearly 16% to $14.25.

Meta's strong performance was driven by increasing advertiser demand, better monetization of its user base, and continued growth in its user base. The company's AI initiatives, such as Meta AI, are also gaining traction, with 700 million people actively using Meta AI each month, and the company expects this number to reach 1 billion users in 2025. Meta's CEO, Mark Zuckerberg, has stated that Meta AI is on track to become the most used AI assistant in the world by the end of the year.

Meta's recent earnings report comes as the company plans to invest heavily in AI, with capital expenditures for 2025 expected to range from $60 billion to $65 billion. This investment is part of the company's broader strategy to build out its own AI infrastructure, which it believes will be a strategic advantage. Meta is also investing in custom AI chips for specific workloads to improve efficiency and is planning to introduce thousands of AI-generated "characters" to its platforms, including Facebook and Instagram, with the aim of increasing engagement.



Analysts have responded positively to Meta's earnings report and its plans to invest in AI. The average analyst rating for Meta Platforms stock from 48 stock analysts is "Strong Buy," with a price target of $703.81, representing an increase of 2.12% from the current stock price of $689.18. However, some analysts have expressed concerns about the company's ongoing search partnership with Google and its dependence on advertising and search revenue.



In conclusion, Meta Platforms' strong fourth-quarter earnings and plans to invest heavily in AI have analysts bullish on the stock. The company's ability to monetize its large user base effectively, coupled with its investments in AI and the metaverse, positions it well for future growth. However, investors should be aware of potential risks, such as changes in the advertising market and the company's ongoing search partnership with Google. As always, investors should conduct their own due diligence and consider seeking the advice of a financial advisor before making any investment decisions.