Under the Spotlight Wall St: Meta Platforms (META)

Mark Zuckerberg told investors on Meta Platforms’ ($META) Q4 earnings call that ‘this is going to be a really big year.’

How big? Meta’s CEO believes this will be the year an AI assistant reaches more than one billion people – and he expects Meta AI to be it. That big ambition comes with a big price tag: US$65b will be spent on capex, much of it on building infrastructure like data centres. They’re building a two-gigawatt AI data centre in Louisiana that’s so big that it would cover a significant part of Manhattan if placed there.

Zuckerberg founded Facebook in 2004 and built it into the world’s second largest digital advertising platform, supported by acquisitions of Instagram and Whatsapp. The all-in bet on AI is about embedding the technology more deeply across its platforms to engage users, empower creators and attract advertisers keen to target their ads precisely at the right users.

Meta’s AI ambitions, coupled with forecast Q1 year-on-year revenue growth of 8%-15%, have lifted its shares to record highs. The stock is up 56% over the past year compared to a 22% gain in the S&P 500 Index. 

All about AI

Meta is a social media and messaging powerhouse: more than 3.3 billion people use its apps each day. This large user base is driving the focus on the development of Meta AI as the AI assistant of choice. Meta AI is already used by more people than any other assistant: it has 700m monthly active users. Zuckerberg argues that once a service reaches that kind of scale, it usually develops a durable long-term advantage. 

Personalisation was the catchcry of the Q4 earnings call. Zuckerberg believes people don't want to use the same AI: they want their AI to be personalised to their individual interests, personality and culture. Updates to Meta AI allow it to deliver more custom responses by remembering previous queries and analysing what users engaged with on Facebook and Instagram to sharpen its intuition for their interests. Zuckerberg promised ‘some fun surprises’ for Meta AI in 2025.

Meta’s AI ambitions extend beyond AI assistants. The company is backing its Llama 4 large language model to become the most advanced and widely used AI model. That’s big talk given the billions being poured into model development by rivals like Google ($GOOG) (operating the Gemini LLM), Microsoft ($MSFT) (backing OpenAI and its ChatGPT) and Amazon ($AMZN) (running Claude via Anthropic). Llama 4 will have agentic AI capabilities, which is the hottest trend in technology right now. The open source nature of Llama 4 means there should be a lot of use cases across different industries.

Meta has big plans for agentic AI within its own business. Zuckerberg thinks that, by the end of 2025, it’ll be possible to build an AI engineering agent that has the coding and problem-solving abilities of a mid-level engineer. He argues whoever builds this capability first will have an advantage in AI research. And meanwhile, Meta will push ahead with development of its augmented reality glasses based on the idea that  the next computing platform will be worn on your face.

Creators welcome

The big AI investment has stolen the headlines, but ultimately it’s all about supplying more ads. AI is a way to bring in more creators and users and then… connect them with targeted ads across its platforms. 

Meta’s Q4 apps ad revenue was US$46.8 billion, up 21% year-on-year. Daily active users grew across Facebook, Instagram and WhatsApp. The total number of ad impressions increased 6%, though not quite the 21% YoY increase from Q4 2023. Impression growth was mainly driven by Asia-Pacific. The average price per ad increased 14%, reflecting increased advertiser demand, driven by improved ad performance. Meta expects Q1 revenue to be US$39.5b-US$41.8b: this would equal 8%-15% YoY growth.

Meta wants to win over more creators. A new Instagram feature was introduced in Q4 that allows creators to first share a Reel with people who don’t follow them. This allows them to test content and see what performs best before deciding to share it with their followers. A new app called Edits will be launched, with tools to make it easier to create Reels on phones. 

In the U.S., Meta launched a new destination in Reels that consists of content a user’s friends have left a note on or liked. This has delivered ‘very positive’ results and will be expanded globally in coming months. On Threads, Meta is updating its recommendation systems to prioritise more recent posts, surface content from top creators and ensure users see more content from accounts they follow. 

Precision ads

Meta wants to grow ads across platforms, especially in video. They’re optimising where ads appear in the depth of a user’s feed. The company sees impression growth on Threads as an opportunity and will test ads on it this quarter. Such enhancements to its ads ranking systems improve marketing performance for advertisers. 

A machine learning system called Andromeda was launched in 2024 in partnership with Nvidia. This delivered a 10,000x increase in the complexity of models used for ads retrieval, which ranks ads from a pool of millions of ads to a few thousand considered for a user. This allows Meta to run more sophisticated prediction models to better personalise which ads users are shown. This has driven an 8% increase in the quality (or relevance) of ads that users see.

Meta is driving increased automation of ad campaigns with its Advantage+ ad campaigns. Use of Advantage+ campaigns continues to grow, with revenue surpassing a US$20b annual run-rate and growing 70% YoY in Q4. The company is testing a new streamlined campaign creation process so advertisers won’t need to choose between running a manual or Advantage+ campaign. This allows advertisers to take advantage of Advantage+ performance and still customise their campaigns. There are more than 4m advertisers using at least one of Meta’s AI creative tools, up from 1m six months ago.

Betting big

Meta Platforms’ bet on the future of AI is bold. There are big goals for Meta AI and large licks of capital being invested in AI infrastructure.

Investors are supportive, but Meta needs to convert vision into views and then into advertising revenues. No pressure: there are only 3.3 billion of us impacted by Zuckerberg’s every move. 

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.