Meta Platforms (META) Q4 Earnings: The AGI Capital Pivot as Forward Guidance on CapEx Holds the Key

[Ben Graham]

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As Meta Platforms, Inc. (NASDAQ: META) prepares to release its Fourth Quarter and Full Year 2025 financial results on Wednesday, January 28, 2026, the company stands at the precipice of the most aggressive capital deployment cycle in the history of the technology sector.

What to Expect?

The narrative surrounding the stock has shifted fundamentally from the "Year of Efficiency" that defined the post-2022 recovery to a new, capital-intensive paradigm focused on the pursuit of Artificial General Intelligence (AGI).

The upcoming earnings print, while technically a report on the holiday quarter’s advertising performance, will effectively serve as a referendum on CEO Mark Zuckerberg’s "Founder Mode" strategy, a vision that prioritizes long-term technological dominance in AI infrastructure over near-term free cash flow preservation.

Meta’s main money-maker, its advertising business is stronger than it has been in five years. Experts on Wall Street expect the company to bring in between $56.8 billion in the final three months of 2025, which is a 21% jump compared to the year before.

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Source: Created by Zain Vawda, Google Gemini

Why is this happening?

Several key factors are driving this growth:

Smarter Ads: New AI tools (like Advantage+) are making ad targeting much more effective.

Reels is Paying Off: Meta has figured out how to make more money from its short-form video content.

Currency Trends: The global exchange rate is currently working in the company’s favor.

While total revenue is soaring, the actual profit per share (EPS) is only expected to grow by about 2% (landing around $8.15 to $8.21). This is because Meta is spending massive amounts of money on research, development, and new equipment, which is starting to eat into their profit margins.

The End of "Efficiency" and the Rise of "Superintelligence"

From Opex Discipline to CapEx Aggression

The "Year of Efficiency" in 2023/2024 was characterized by headcount reductions and the flattening of organizational structures. This phase successfully restored investor confidence and drove the stock price recovery. However, 2025 marked the beginning of a new phase: the "AI Arms Race."

Unlike the Metaverse pivot of 2021, which was viewed skeptically as a drift away from core competencies, the current pivot to AI is directly synergistic with Meta’s core business. The "Meta Superintelligence Labs" are not just building abstract AGI; they are powering the recommendation algorithms that keep users glued to Instagram and the ad-ranking engines that maximize ROI for advertisers. Nevertheless, the costs are staggering. The firm raised its full-year 2025 CapEx guidance multiple times, landing at $70–$72 billion, a 70% jump from the previous year.

The "Founder Mode" Paradigm

A critical qualitative factor influencing institutional sentiment is the governance structure of Meta. Analysts at Rothschild Redburn have upgraded the stock to "Buy" with a $900 price target, explicitly citing CEO Mark Zuckerberg’s "founder mode" as a long-term positive. This term describes a leadership style where the founder, insulated by dual-class share structures, ignores short-term Wall Street pressure to pursue generation-defining technological shifts.

While "founder mode" allows for bold bets, it also introduces principal-agent risk. Investors are effectively passengers on Zuckerberg’s vessel. With reports that he is pursuing AI investments "regardless of financial cost," the Q4 earnings call will be scrutinized for any signs of fiscal guardrails. The concern is that without external checks, the pursuit of Llama 4 and beyond could lead to a period of "profitless prosperity," where revenue grows but free cash flow evaporates into GPU clusters.

The Valuation Disconnect

Despite the stock’s 12.74% rise in 2025, Meta underperformed the Nasdaq 100 (which gained 21%). This underperformance has created a valuation anomaly. According to KeyBanc Capital Markets, Meta currently trades at its widest price-to-earnings (P/E) discount to Alphabet since 2022, with a gap of approximately 7x.

Current P/E: ~29.29x

PEG Ratio: 4.12

Gross Profit Margins: ~82.01%.

This discount suggests that the market is pricing in a severe "capital penalty", essentially assuming that the billions being poured into Nvidia H100s and Blackwell chips will have a lower Return on Invested Capital (ROIC) than the core software business.

The Q4 earnings report is the company’s opportunity to refute this assumption by demonstrating how AI is already accretive to ad revenue.

Key Areas to Focus On & Potential Scenarios

The primary catalyst for stock price volatility post-earnings will not be the backward-looking Q4 metrics, but rather the forward-looking guidance for 2026 capital expenditures (CapEx). With management having previously signaled that 2026 spending will be "notably larger" than the $70–$72 billion allocated in 2025, market fears have coalesced around the potential for CapEx to breach the $100 billion threshold.

This expenditure is driven by the construction of "Meta Compute" centers and the securing of massive energy capacity reported to be upwards of 6.6 gigawatts to power next-generation Llama models and the newly christened "Meta Superintelligence Labs".

Q1 2026 Revenue Outlook

Analysts project Q1 2026 revenue to be approximately $51.3 billion.

Seasonality: This represents a sequential decline from Q4 (typical for the post-holiday period) but implies a continued 21% YoY growth rate.

Significance: Maintaining >20% growth into 2026 would confirm that the ad market recovery is durable and not just a 2025 anomaly.

META Daily Chart, January 26, 2026

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Source: TradingView

Scenario Analysis for Earnings Day

Scenario A: The Bull Case (Probability: 25%)

• Metrics: Revenue >$59B. EPS >$8.30.
• Guidance: 2026 CapEx is guided conservatively ($85-90B). Q1 Revenue growth guided to 22%+.
• Narrative: AI ROI is materializing faster than expected. Ad prices are surging. Reality Labs losses are flat.
• Stock Reaction: Rapid repricing toward the $800+ targets.

Scenario B: The Base Case (Probability: 50%)

• Metrics: Revenue ~$58.4B. EPS ~$8.15.
• Guidance: 2026 CapEx guided to $95-100B. Q1 Revenue growth ~18-20%.
• Narrative: Growth is solid, but the bill is due. Investors begrudgingly accept the high spend because the "moat" argument (6.6GW energy deals) is compelling.
• Stock Reaction: Range-bound volatility. Stock holds $650 level but struggles to break out until margin compression eases.

Scenario C: The Bear Case (Probability: 25%)

• Metrics: Revenue <$57B (Miss).
• Guidance: 2026 CapEx >$105B. Reality Labs losses widen to >$7B.
• Narrative: "Profitless Prosperity." The company is growing revenue but burning all cash on hardware with uncertain returns. The "Metaverse" trauma of 2022 resurfaces, this time labeled "AI."

Stock Reaction: Sharp correction. Testing support levels at $550.

Lastly and something that may be of interest, is what are the institution's price targets & ratings?

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Source: LSEG Data

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

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