Meta Platforms reported better-than-expected fourth-quarter revenue on Wednesday, but its outlook for the first quarter of 2025 raised concerns, signalling mixed results for its ambitious artificial intelligence (AI) initiatives. While the parent company of Facebook and Instagram surpassed Wall Street’s expectations, predicting sales between $39.5 billion and $41.8 billion for the first quarter, analysts had forecasted slightly higher revenue of $41.72 billion, according to data compiled by LSEG.
Despite the revenue beat, Meta’s share price remained flat in after-hours trading, though it rose briefly as CEO Mark Zuckerberg spoke optimistically about the company’s AI investments. Zuckerberg reiterated Meta’s belief in open-source AI and the company’s stance that open-source AI should become the global standard. This comes on the back of the launch of DeepSeek, a Chinese AI startup that has caused disruption in the global markets by claiming its models either match or outperform top US rivals, including Meta’s Llama models, at a fraction of the cost.
“There’s going to be an open-source standard globally,” Zuckerberg said during a conference call, adding that it was essential for this standard to be American-led. While Zuckerberg’s comments may have boosted investor confidence in Meta’s AI direction, the muted outlook for the first quarter has raised new questions about how Meta plans to manage its capital expenditure amid its ongoing AI and metaverse investments.
Meta’s capital spending for 2025 is expected to reach as high as $65 billion, primarily directed towards expanding the company’s AI infrastructure, as Zuckerberg previously announced. In addition to AI investments, Meta is also focusing on the development of its metaverse, which includes augmented reality systems and smart glasses. However, the company’s core business of social media advertising remains the backbone of its revenue stream, funding these expensive technological pursuits.
Meta’s total expenses for 2025 are projected to be between $114 billion and $119 billion, up from $95 billion in 2024. This increase in expenditure highlights the scale of Meta’s ongoing investments in AI and other cutting-edge technologies, but also adds pressure on the company to ensure these ventures yield significant returns.
“Meta’s gangbusters Q4 results clearly demonstrate that ad revenues remain the company’s lifeblood,” said Jeremy Goldman, principal analyst at eMarketer. “That said, the biggest question heading into 2025 isn’t about today’s earnings, it’s about whether Mark Zuckerberg’s $60-65 billion AI infrastructure bet will pay off.”
One of Meta’s most crucial metrics, family daily active people (DAP), showed growth of approximately 5 per cent compared to the previous year, reaching 3.35 billion users across its various platforms. While the increase in daily active users is promising, the market is still highly focused on the company’s ability to successfully balance its advertising business with its costly AI and metaverse ambitions.
Meta’s results come amid growing competition in the AI sector, following the launch of DeepSeek’s latest AI models. The Chinese startup has generated significant attention for claiming that its models outperform top US rivals while operating at a much lower cost. This challenges the conventional wisdom that scaling AI requires vast amounts of computing power and heavy investment.
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Zuckerberg acknowledged that it was too early to assess the full impact of DeepSeek’s emergence on Meta’s capital expenditure strategy, but he also noted that there were several advancements from DeepSeek that Meta could potentially incorporate into its own products.
While the emergence of DeepSeek has sparked concerns over rising AI costs in the US, it could potentially work in Meta’s favour if the company can successfully reduce the costs of building and supporting AI models. Meta has also been investing heavily in acquiring Nvidia’s highly sought-after AI chips, with plans to end 2025 with over 1.3 million graphics processors (GPUs) and bring about 1 gigawatt of computing power online.
However, Meta’s aggressive AI spending strategy has prompted some scrutiny from investors, who are concerned about the sustainability of such heavy investments. In a move to bolster company performance, Zuckerberg recently announced that Meta would be laying off 5 per cent of its “lowest performers” and warned employees that more job cuts could be forthcoming in 2025.
As Meta continues to push forward with its AI and metaverse initiatives, its ability to balance high capital expenditures with steady ad revenue growth will be closely scrutinised by both investors and analysts. The company’s mixed results for the fourth quarter, combined with the muted first-quarter outlook, suggest that while Meta’s long-term AI ambitions may be promising, the short-term challenges are far from over.
