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Meta earnings updates: Stock drops 6% as capex spending expected to balloon to new heights [Business Insider]

Meta Platforms Inc. delivered its latest quarterly earnings report after the closing bell on Wednesday, and the headline numbers were strong. Revenue beat expectations, user growth remained steady, and the company’s core advertising business continued to hum. But one number stole the show—and sent shares sliding 6% in after-hours trading: the eye-popping, ballooning capital expenditure forecast for 2025.

The CapEx elephant in the room

Meta’s management guided for full-year 2025 capital expenditures in the range of $60 billion to $65 billion. That’s a staggering jump from the $35 billion to $40 billion range the company had projected just a few quarters ago. To put it bluntly, Meta is preparing to spend like a tech giant that sees the future—and is willing to bet the farm on it.

CEO Mark Zuckerberg, during the earnings call, framed this as a necessary investment in artificial intelligence infrastructure. “We’re building for the next decade,” he told analysts. “The compute power we need for AI is scaling faster than anything we’ve ever seen. If we don’t build now, we’ll be playing catch-up for years.”

Investors, however, are not so sure. The stock’s 6% drop reflects a growing anxiety on Wall Street about the return on investment for these massive outlays. Meta already spent $28.4 billion on capex in the first three quarters of 2024, and the new guidance suggests the spending spree is only accelerating. Analysts are asking the same question: is this a visionary bet, or is Meta pouring cash into a black hole?

Revenue beats, but costs are climbing

Let’s look at the numbers that actually beat expectations. Meta reported Q4 2024 revenue of $40.1 billion, up 21% year-over-year and slightly above the consensus estimate of $39.5 billion. Earnings per share came in at $5.33, compared to the $5.20 analysts were looking for. The advertising business remains a cash cow, with ad impressions growing 12% and the average price per ad increasing 9%.

But here’s the rub: total costs and expenses for the quarter were $24.7 billion, up 14% from the same period last year. That’s not alarming on its own, but when you factor in the new capex guidance, the cost trajectory becomes a serious concern. Meta’s free cash flow for the quarter was $10.2 billion, a healthy number—but with $60 billion in planned capex, that cash pile is about to be drained at a much faster rate.

Chief Financial Officer Susan Li tried to soothe nerves by noting that Meta’s balance sheet remains strong, with $65 billion in cash and marketable securities. “We have the financial flexibility to fund these investments,” she said. “We are not taking on debt to do this. We are using our own cash flow.”

The AI arms race is real

Why the sudden jump in spending? The answer is three letters: AI. Zuckerberg’s vision for Meta is increasingly tied to building the world’s most advanced AI models, and that requires data centers, GPUs, networking equipment, and energy infrastructure on a scale that makes previous tech builds look quaint. The company is reportedly spending billions on Nvidia’s H100 and H200 chips, and is also designing its own custom AI silicon.

But the AI boom doesn’t stop at infrastructure. Meta is also pouring resources into its Llama large language models, AI-powered ad tools, and the metaverse—which still feels like a long shot. While the Reality Labs division reported $1.1 billion in revenue for the quarter, it lost $4.2 billion. That’s a loss that investors have grown accustomed to, but they’re less tolerant when combined with the ballooning capex.

“Investors are giving Meta the benefit of the doubt on AI, but there is a limit,” said Dan Ives, an analyst at Wedbush Securities. “If they don’t show meaningful revenue from these investments within the next 12 to 18 months, the stock will face more pressure.”

User growth: still going strong

It’s not all doom and gloom. Meta’s family of apps—Facebook, Instagram, WhatsApp, and Messenger—saw daily active users reach 3.28 billion, up 7% year-over-year. That’s a massive, sticky user base that continues to grow in markets like India, Brazil, and parts of Southeast Asia. The engagement is still there, and advertisers are still paying a premium to reach those users.

However, the user growth rate is slowing. In the U.S. and Europe, markets are largely saturated. The future growth will have to come from emerging markets, where average revenue per user is lower. That puts even more pressure on the company to monetize effectively through AI-powered ad targeting.

Zuckerberg also teased new features coming to the platform, including deeper AI integration in Messenger and Instagram, and what he called “AI agents” that will help businesses interact with customers. “The next wave of productivity is going to come from these AI tools,” he said. “We want to be the platform that powers that.”

What Wall Street is watching next

The big question now is whether Meta can control the narrative. The stock is down 6% in after-hours trading, and it could fall further if the broader market interprets the capex guidance as a sign of poor capital discipline. Some analysts have already downgraded the stock, citing “uncertainty around ROI for AI spending.”

But others see this as a classic growth-tech story. “Look at what Amazon did when it invested heavily in AWS and fulfillment centers in the 2010s,” said one bullish fund manager. “Everyone complained, and then they reaped the rewards for a decade. Meta could be playing the same game.”

For now, the market is voting with its feet. Meta’s stock is down, but the company still has the cash, the user base, and the ambition to pull off a massive pivot. Whether that pivot pays off—or leaves investors holding the bag—will be one of the defining tech stories of 2025.

Ahmed Abed – News journalist

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