Meta reported strong fourth-quarter earnings, with sales up 24% to USD 60 billion. Operating margins contracted by 700 basis points to 41% due to rising AI-related costs. 2026 guidance includes USD 125 billion in capital expenditures and USD 162 billion in operating expenses.

Meta’s ad business remains strong, driven by AI investments that boost engagement, ad efficacy, and content recommendation. Engagement metrics like time spent on Instagram and Facebook are high, with video engagement particularly strong. This leads to an 18% increase in ad impressions for the quarter.

Despite outperforming on sales, Meta’s 2026 capital and operating expenses guidance is higher than expected. The stock is viewed as undervalued, with a fair value estimate of USD 850. As more data on the impact of AI investments emerges, investors may align with a bullish view on Meta.

For the first quarter, Meta expects a 30% sales growth driven by demand for ad products. Sales growth for 2026 is projected at 25%. A new large language model launch is anticipated, likely to compete with Google, OpenAI, and Anthropic in the AI space.

Read more at Morningstar: Meta Earnings: Strong End to 2025 as AI Monetization Begins to Show