Image source: Meta Platforms
I Meta Platforms (NASDAQ:META) stock is rising in extended trading after the company’s Q4 results on Wednesday (January 28). The question is: why?
After its Q3 revival, the stock fell as the firm’s spending on Artificial Intelligence (AI) spooked investors. That looks set to continue, but the answer is very different this time.
Q4 income
Meta’s results for the fourth quarter of 2025 were very strong. Revenue was up 24% and earnings per share grew 11% – but these aren’t the numbers investors were really expecting.
A recent market focus has been the company’s plans to continue investing in AI data centers. And while capital expenditures rose 49% in Q4, there’s more to come in 2026.
Meta has announced plans to increase spending from $72bn to somewhere between $115bn and $135bn. That’s more than double the company’s revenue by 2025.
When the company announced a $5bn increase in capital expenditure in Q3, the stock fell 11%. But investors seem to be in a pretty good mood at the moment – and I have an idea why.
What has changed?
I think the biggest difference is the change in voice from CEO Mark Zuckerberg. That may not sound like much, but it may be at the heart of how investors view Meta shares right now.
In Q3, Zuckerberg talked about spending money to avoid the risk of AI misinvestment. But the idea that the company was spending money because it had no choice was wrong.
In this case, the CEO was very optimistic about the purpose of the AI investment. The emphasis was more on the type of products Meta hopes to introduce, rather than losing ground.
From an investment perspective, that can make a big difference. It’s one thing for a company to spend $70bn to avoid falling behind, but another to have $130bn of opportunities.
What should investors consider?
Meta encourages investors to see its high spending as an investment opportunity, rather than a necessary expense. But I’m not sure I buy it and that makes me wary.
The company has also been borrowing to fund its AI implementation and this changes the equation. Getting a bad return on cash is one thing, but taking on debt raises the stakes for investors.
Importantly, however, the company expects operating income to grow in 2026. Given the increase in already large spending commitments, it is impressive and reassuring.
This – along with other very impressive results in Q4 – highlights the strength of Meta’s advertising business. But that’s perhaps what investors didn’t need to be reminded of.
The risks and rewards of AI
Meta is increasing its capital expenditure, but the stock market is taking the news well – certainly compared to the response at the end of Q3. And I think there are two main reasons for this.
In my opinion, the excellent comments given by Mark Zuckerberg – as an opportunity, rather than a threat – is one of the reasons. Another strong operating income guidance for 2026.
Both of these are encouraging, but I think the rising share price should make investors cautious. The stock is definitely one to watch, but that’s about as far as I’m willing to go now.
