Key Moments
- Meta raised its 2026 capital expenditure to $115-$135 billion, up sharply from $72.22 billion last year.
- Fourth-quarter advertising revenue climbed to $58.14 billion from $46.78 billion. The results helped Meta shares rise 10% in after-hours trading.
- First-quarter revenue is projected at $53.5-$56.5 billion, above the analyst average of $51.41 billion.
Massive Capex Ramp to Power “Superintelligence”
Meta, the owner of Instagram, sharply increased its capital spending plans. The goal is to deliver “superintelligence,” bringing highly personalized AI to its social media platforms.
On Wednesday, the company said it expects 2026 capex between $115 billion and $135 billion. The increase reflects spending on infrastructure, payments to cloud providers such as Google, higher depreciation on AI-focused data centers, and rising operating costs.
Market expectations had projected $109.9 billion, while Meta spent $72.22 billion last year. Despite entering the AI race later than competitors, Meta plans hundreds of billions for multiple AI data centers to meet higher compute needs.
Market Reaction and CEO Vision
Investors supported CEO Mark Zuckerberg’s AI push, sending shares up 10% after hours. The fourth-quarter ad revenue rose 24%, exceeding expectations, and first-quarter guidance topped analyst estimates.
“This year, we will deliver personal superintelligence, accelerate our infrastructure, and shape the company’s future,” Zuckerberg said during a call with analysts.
Advertising Strength Funds AI Build-Out
Meta finances its AI investments using its advertising engine. In Q4, ad revenue rose to $58.14 billion from $46.78 billion. Capex grew 49% during the period, outpacing the 24% revenue increase, which reduced operating margin by 7 points.
The company introduced ads on WhatsApp and Threads, competing with Elon Musk’s X. Instagram Reels continues to challenge TikTok and YouTube Shorts in short-form video.
John Belton, portfolio manager at Gabelli Funds, said: “Meta’s core business generates enormous returns, supported by AI infrastructure, even if generative AI revenue is still limited.”
Capacity Constraints and Cloud Partnerships
To expand compute capacity, Meta signed contracts last year with Alphabet, CoreWeave, and Nebius. CFO Susan Li said the company expects capacity constraints to continue through much of 2026.
Meanwhile, Meta’s ad platform drives growth and generates cash flow to fund its superintelligence ambitions. Analysts view 2026 as a transitional year, where advertising supports the AI transformation.
Comparisons With Microsoft and Peer Valuations
Microsoft reported a 66% increase in capex in the December quarter. However, its shares fell 6.5% after hours after slightly beating cloud revenue expectations.
Meta, which rose 12.7% last year, trades at a forward P/E of 22.2. This compares with Alphabet at 29.5, Amazon at 30, and Microsoft at 27.1.
Expense Outlook and Talent Investments
Meta projects total expenses in 2026 at $162-$169 billion, up from $117.69 billion last year. The rise is due to higher employee compensation, particularly for AI specialists.
Zuckerberg consolidated AI efforts under “Superintelligence Labs” and paid premium packages to attract top talent. The company is intensifying competition for AI experts in Silicon Valley.
Guidance and Recent Performance
For Q1, Meta expects revenue of $53.5-$56.5 billion, above the $51.41 billion analyst average. The company reported exceeding profit and revenue expectations for Q4.
Key Financial Metrics Snapshot
| Metric | Value / Range | Comparison / Context |
|---|---|---|
| 2026 Capex Outlook | $115-$135 billion | Versus $109.9 billion expected; $72.22 billion last year |
| 2026 Total Expense Outlook | $162-$169 billion | Up from $117.69 billion a year ago |
| Q4 Advertising Revenue | $58.14 billion | Up from $46.78 billion a year earlier |
| Q1 Revenue Guidance | $53.5-$56.5 billion | Above $51.41 billion analyst average |
| After-Hours Share Move | +10% | Following results and guidance |
| Trailing 12-Month Share Gain | 12.7% | As reported for last year |
| Forward P/E (Next 12 Months) | 22.2 | Alphabet: 29.5; Amazon: 30; Microsoft: 27.1 |
| Microsoft Capex Growth (Dec Quarter) | 66% | Shares fell 6.5% after hours |
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