Today, Meta Platforms (META) is poised to release its Q4 2024 earnings after the market closes, with investors keenly focused on analyzing the impact of the company’s ambitious capex strategy. CEO Mark Zuckerberg has already foreshadowed a significant portion of this by announcing that Meta anticipates spending between $60 billion to $65 billion on capital expenditures in 2025, a sharp increase from the $38 billion spent last year. This investment is primarily aimed at bolstering artificial intelligence (AI) infrastructure, highlighting Meta’s commitment to maintaining its edge in AI technology amidst growing competition.
Meta’s financial health has been robust, with its shares surging 73% year-over-year, reflecting investor confidence in its AI-driven growth strategy. Analysts are forecasting Q4 revenue to hit close to $47 billion, a 17% increase from the previous year, alongside an earnings per share (EPS) of $6.75, which would represent a 27% rise. The company’s advertising business, enhanced by AI tools, has been a key growth driver, with ad impressions up by 7% and ad prices by 11%. This has led to a notable increase in user engagement, with time spent on both Facebook and Instagram growing by 8% and 6%, respectively.
However, the narrative isn’t all positive. Revenue growth has shown signs of slowing down, dropping from 27.3% in Q1 to the anticipated 17% in Q4, which might concern investors about the sustainability of Meta’s expansion. Moreover, the Reality Labs division, focused on the metaverse, is expected to report another hefty loss, this time around $5 billion for Q4, casting doubts on the profitability of Meta’s long-term investments in this area.
The emergence of DeepSeek, offering cost-effective AI solutions, has added another layer of complexity. This new competitor’s model questions the high-cost approach to AI infrastructure, leading to market-wide AI stock declines and putting Meta’s investment strategy under scrutiny. Investors will be keen to hear from Zuckerberg how Meta plans to navigate this competitive landscape, especially given the substantial capital outlay planned for AI.
Regulatory challenges also loom large, with the EU’s Digital Markets Act and various privacy laws potentially hampering Meta’s operational flexibility and profitability. These regulatory headwinds, combined with the slowing revenue growth and massive investments in AI, will be focal points during the earnings call.
Despite these concerns, Meta has maintained a strong performance streak, consistently exceeding EPS estimates, with a $0.81 beat in Q3 2024. The company’s focus on AI to improve advertising efficiency, coupled with Instagram’s growing e-commerce capabilities, continues to drive its core business forward. The stock – last trading at $675.64 – has climbed 15% year-to-date, bolstered by a bullish analyst outlook that includes 52 ‘Buy’ ratings and a median price target of $685. This strong market support highlights continued confidence in Meta’s strategy, even amid concerns over high spending and intense competition.
As Meta shares continue to hit new highs – 52-wk range: $387.10 – $682.58 – today’s earnings report will be crucial. Investors will look for clarity on how Meta plans to achieve a return on its massive AI investments, manage regulatory risks, and respond to competitors like DeepSeek, all while maintaining its growth trajectory.
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