Meta Platforms, Inc. (META) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate mixed signals. Strong ad revenue growth and AI investments are positive, but high expenses, declining Reality Labs revenue, and regulatory risks are concerns. Management's optimism about AI and infrastructure investments is tempered by vague responses on long-term revenue opportunities and investment specifics. The market may remain cautious, resulting in a neutral stock price movement.
Key Financial Performance
Q4 Family of Apps revenue $58.9 billion, up 25% year-over-year. This growth was driven by record-breaking holiday demand and AI-driven performance gains.
Q4 Family of Apps ad revenue $58.1 billion, up 24% year-over-year (23% on a constant currency basis). Growth was attributed to increased advertiser demand and improved ad performance.
Family of Apps other revenue $801 million, up 54% year-over-year. Growth was driven by WhatsApp paid messaging revenue growth and Meta Verified subscriptions.
Q4 Reality Labs revenue $955 million, down 12% year-over-year. The decline was due to lapping the introduction of Quest 3S in Q4 2024 and retail partners procuring Quest headsets earlier in 2025.
Q4 total revenue $59.9 billion, up 24% year-over-year (23% on a constant currency basis). Growth was driven by strong ad revenue and holiday demand.
Q4 total expenses $35.1 billion, up 40% year-over-year. The increase was driven by employee compensation, legal expenses, and infrastructure costs.
Q4 operating income $24.7 billion, representing a 41% operating margin. This reflects strong revenue growth and operational efficiency.
Net income $22.8 billion or $8.88 per share. This was supported by strong operating income and a lower tax rate.
Capital expenditures $22.1 billion, driven by investments in data centers, servers, and network infrastructure.
Free cash flow $14.1 billion, reflecting strong operational performance and cash management.
Cash and marketable securities $81.6 billion, with $58.7 billion in debt. This indicates a strong liquidity position.
Ad impressions growth 18% year-over-year. Growth was driven by engagement, user growth, and ad load optimizations.
Average price per ad Increased 6% year-over-year, benefiting from increased advertiser demand and improved ad performance.
Instagram Reels watch time Up more than 30% year-over-year in the U.S., driven by ranking and product improvements.
Facebook video time Continued to grow double digits year-over-year in the U.S., supported by ranking and product efforts.
Threads time spent Increased by 20% in Q4, benefiting from recommendation improvements.
Paid messaging within WhatsApp Crossed a $2 billion annual run rate in Q4, reflecting strong adoption and scaling.
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Operating Highlights
AI-driven products: Meta is focusing on building personal super intelligence and integrating AI with recommendation systems to enhance user experience and ad performance. New Agentic shopping tools and immersive media formats are being developed.
AI glasses: Sales of AI glasses tripled last year, and Meta is directing most of its Reality Labs investment towards glasses and wearables.
Reality Labs: Focus is on making Horizon successful on mobile and VR a profitable ecosystem. Losses are expected to peak this year.
Ad revenue growth: Q4 Family of Apps ad revenue was $58.1 billion, up 24% year-over-year, driven by increased advertiser demand and improved ad performance.
WhatsApp paid messaging: Revenue grew significantly, contributing to Family of Apps other revenue of $801 million, up 54%.
Threads and WhatsApp ads: Ads are being expanded to new regions, including the U.K., EU, and Brazil, with WhatsApp ads in status rolling out globally.
AI infrastructure: Meta Compute initiative focuses on efficient engineering, silicon program advancements, and reducing costs per gigawatt.
Employee productivity: AI coding tools increased engineer output by 30%, with power users seeing an 80% increase.
Ad system improvements: New AI models and architectures improved ad clicks by 3.5% and conversions by over 1%.
AI investment: Meta is heavily investing in AI infrastructure, including data centers, servers, and silicon programs, to support future growth.
Regulatory compliance: Meta is aligning with the European Commission on less personalized ads and monitoring legal and regulatory headwinds in the EU and U.S.
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Risk or Challenges
Reality Labs losses: Reality Labs is expected to incur losses similar to 2025 levels, which could impact overall profitability. This division has been a significant cost center, and while losses are expected to peak, they remain a financial challenge.
Regulatory and legal risks: The company faces ongoing scrutiny in the EU and U.S., particularly on youth-related issues. Trials scheduled for 2026 could result in material losses, and changes to less personalized ads in the EU may impact revenue.
Infrastructure costs: Significant investments in infrastructure, including data centers, servers, and silicon, are driving up expenses. These costs are expected to grow further in 2026, potentially straining financial resources.
Employee compensation and hiring: Employee compensation expenses are rising due to technical hires, particularly in AI. This is a major contributor to expense growth, which could pressure margins.
Economic uncertainties: The company is exposed to economic uncertainties that could affect advertiser demand and overall revenue performance.
Competition in AI and technology: Meta faces competitive pressures in AI and technology advancements, which require continuous investment to maintain leadership. Falling behind could impact strategic objectives.
Ad monetization challenges: While ad revenue is growing, the company faces challenges in optimizing ad load and performance, particularly in newer services like Threads and WhatsApp.
Supply chain and silicon program risks: Dependence on silicon and energy investments, along with supply chain complexities, could pose risks to cost efficiency and operational execution.
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Guidance & Outlook
AI Acceleration in 2026: Meta expects 2026 to be a year of significant AI advancements, with new models and products being released. The company plans to steadily push the frontier of AI capabilities throughout the year.
AI Integration with Recommendation Systems: Meta is working on merging large language models (LLMs) with its recommendation systems to create more personalized and goal-oriented user experiences. This includes tailoring feeds to individual goals and enhancing ad targeting.
Commerce and Ads Enhancements: Meta plans to introduce new agentic shopping tools and improve ad systems to better match users with products and businesses. Ads in Threads and WhatsApp will expand globally, with a focus on optimizing ad formats and performance.
Reality Labs Investment and Losses: Meta will focus Reality Labs investments on glasses and wearables, aiming to make VR a profitable ecosystem over the coming years. Losses in Reality Labs are expected to peak in 2026 before gradually reducing.
Infrastructure and Silicon Investments: Meta will continue significant investments in infrastructure, silicon, and energy to support AI advancements. The company expects cost efficiencies in silicon and energy over time.
Capital Expenditures and Financial Outlook for 2026: Meta anticipates capital expenditures of $115 billion to $135 billion in 2026, driven by investments in AI and core business infrastructure. Total expenses are expected to range from $162 billion to $169 billion, with operating income projected to exceed 2025 levels.
Revenue Guidance for Q1 2026: Meta projects Q1 2026 revenue to be between $53.5 billion and $56.5 billion, with a 4% foreign currency tailwind to year-over-year growth.
AI-Driven Productivity Gains: Meta is investing in AI-native tools to enhance employee productivity, with a focus on enabling individuals to achieve significant impact. AI coding tools have already increased output per engineer by 30% in 2025, with further gains expected in 2026.
Regulatory and Legal Risks: Meta is monitoring legal and regulatory headwinds in the EU and U.S., which could impact financial results. Changes to less personalized ads in the EU will begin rolling out in Q1 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Mark, as you think about ramping all this investment and the personal intelligence opportunity, the Meta compute opportunity, can you walk us through how you think about the largest revenue or ROIC long-term opportunities over the next 3, 5, 10 years?
A:Mark Zuckerberg provided a high-level response, stating that the company is focused on improving core products, accelerating the current business, and exploring new business opportunities such as Meta AI, shopping, and commerce. He mentioned the Manus acquisition as an example of integrating tools to accelerate business results. However, he acknowledged that his answers might lack detail at this stage.
Q:Susan, can you help us understand 2 or 3 of the biggest drivers of the revenue inflection you're seeing in 2026?
A:Susan Li highlighted strong demand continuing from Q4 2025 into 2026, foreign currency benefits, and improvements in ad performance, including advances in ads ranking, delivery systems, and new features like Advantage+.
Q:Can you provide an update on your internal needs for compute against your road map and the relationship between applying more compute and monetization outcomes?
A:Susan Li stated that the company remains capacity constrained but expects to add significant capacity in 2026. She mentioned efforts to optimize workloads and improve infrastructure efficiency. On monetization, she noted that larger models could benefit from more compute, and scaling compute could lead to gains in ads ranking and recommendation systems.
Q:Mark, would you be surprised if there’s no meaningful progress and adoption of new products and initiatives by the end of the year?
A:Mark Zuckerberg expressed optimism about rolling out new products throughout the year, emphasizing that AI will enable new experiences and productivity improvements. He acknowledged that some initiatives might take time to reach product-market fit but expects to see successes by year-end.
Q:Susan, how hard of a line is there in terms of investment levels to core performance if more resources are needed for AI opportunities?
A:Susan Li clarified that operating income in 2026 is expected to exceed 2025 levels in absolute dollars. She emphasized the company’s focus on reinvesting revenue into AI infrastructure and talent while maintaining flexibility to adapt to investment opportunities.
Q:Mark, could you provide more detail on the progress of the MSL team and the path to a frontier model this year?
A:Mark Zuckerberg stated that the MSL team is about six months into its work, with positive early indicators. However, he emphasized that this is a long-term effort and the first set of models will demonstrate the trajectory rather than being a single moment in time.
Q:Susan, do you expect to have positive free cash flow in 2026, and how should we think about JVs for data center and compute build-out?
A:Susan Li confirmed significant investments in infrastructure capacity to support AI efforts, supported by the company’s cash generation. She mentioned exploring various options for long-term flexibility in capacity needs but did not provide specific details on JVs.
Q:Mark, how do you think about expanding opportunities beyond ads, such as subscriptions or licensing cloud models?
A:Mark Zuckerberg acknowledged the potential for opportunities beyond ads but emphasized that ads will remain the primary growth driver for the next few years. He noted ongoing efforts to deliver value to businesses and improve core apps.
Q:Susan, are you seeing a general acceleration in e-commerce activity, and where do you think the advertising dollars are coming from?
A:Susan Li reported healthy year-over-year growth across all verticals except politics, with online commerce being the largest contributor. She noted strong demand during the holiday shopping period and broad-based growth across regions and advertiser sizes.
Q:Mark, could you elaborate on the plan for Horizon Worlds and its potential areas in gaming or communication?
A:Mark Zuckerberg discussed the vision of creating more interactive and immersive content formats, including Horizon Worlds. He highlighted the potential for AI to enable new experiences, such as creating and sharing interactive worlds or games, accessible through mobile and other platforms.
Q:Susan, can you provide more insights into the ranking and recommendation model changes and their future potential?
A:Susan Li detailed improvements in recommendation systems, including scaling models, using longer content interaction histories, and incorporating LLMs. She also highlighted advancements in ad models like GEM and their potential to unlock significant growth.
Q:Mark, how critical is it for Meta to have a leading general-purpose model versus excelling at specific use cases?
A:Mark Zuckerberg emphasized the importance of having a leading general-purpose model to maintain creative and competitive capabilities. He stated that controlling underlying technology is essential for designing experiences and shaping the future of products.
Q:Susan, are you seeing diminishing returns on investments in ranking and recommendation systems, and do you have visibility into opportunities beyond 2026?
A:Susan Li stated that investments in 2025 paid off and similar investments are planned for 2026. She acknowledged potential headwinds later in the year but expressed confidence in the ROI-driven investment process to support growth.
Q:What is the update on Meta AI engagement and usage, and are there plans for share repurchases?
A:Susan Li reported that Meta AI is available in over 200 markets, with engagement varying by region and app. She emphasized the focus on making Meta AI highly personalized. On share repurchases, she stated that the priority is investing in AI, but the company will evaluate repurchases opportunistically.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving direct answers to questions about the long-term revenue opportunities from AI and compute investments, the specific progress of the MSL team, and the detailed plans for expanding beyond ads. Responses were high-level and lacked concrete details, often emphasizing that more information would be available in the future.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI acceleration
AI program
AI tooling
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Chairman effort
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Instagram record
Meta Compute
Meta Full
Meta Platform
Meta contributor
Meta experience
Meta place
New Agentic
North Star
People world
Platform Full
President Vice
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Threads ad
Today apps
billion people
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phone
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META Transcript
Meta Platforms, Inc. (META) Q4 2025 Earnings Call Transcript
Unknown1-28
The earnings call summary and Q&A indicate mixed signals. Strong ad revenue growth and AI investments are positive, but high expenses, declining Reality Labs revenue, and regulatory risks are concerns. Management's optimism about AI and infrastructure investments is tempered by vague responses on long-term revenue opportunities and investment specifics. The market may remain cautious, resulting in a neutral stock price movement.
Meta Platforms, Inc. (META) Q3 2025 Earnings Call Transcript
Positive10-29
Meta's earnings call highlights strong financial performance, with significant revenue growth and a robust operating margin. Despite increased expenses, the company maintains a healthy cash flow and has strategic investments in AI and infrastructure, indicating future growth potential. The Q&A session reveals optimism about AI's role in enhancing engagement and monetization, although some management responses lack specific details. Overall, the positive aspects, such as record revenue and promising AI developments, outweigh concerns, leading to a positive sentiment for the stock's short-term performance.
Meta Platforms, Inc. (META) Presents At Goldman Sachs Communacopia + Technology Conference 2025 Transcript
Neutral9-9
Meta Platforms, Inc. (META) Q2 2025 Earnings Call Transcript
Unknown7-30
The earnings call presents a mixed outlook. While there are positive developments in AI and strategic initiatives, concerns about high expenses, potential regulatory impacts, and unclear monetization strategies temper the sentiment. The Q&A reveals optimism but lacks concrete details, adding uncertainty. Overall, the sentiment is balanced, leading to a neutral prediction.
META Report
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