Summary
The team analyzed Meta's Q4 2025 earnings results in real-time, discussing financial performance, strategic direction, and investment implications. Meta reported strong results with revenue of $59.9B (up 24% YoY) and announced significant AI infrastructure investments for 2026.
The team assessed Meta's position as more positive than negative overall:
Positive Factors:
Risk Factors:
The team identified need for better preparation and data organization:
Notes
Transcript
Okay, any last thoughts? I think we are well prepared. I like the new format basically. like having those expectations. Um... I'm still not 100% sure like what to do to be honest so Thank you. Yeah, because we will see a complete picture of things, I think, right? So what to do, especially if something is very good and other data points are not so good and it's more of a mixed picture and so on. But we can discuss also live, I would say, during the call.
What to do? Yeah, but I think like even if revenue is good, like when they report like 26%, and then maybe get like over 130 billion in CapEx. I think that will still be that. Good beer.
Good beer. Okay, I'm also logging into interactive Procast. Thank you. I'd be curious to see See how interesting to see if they are reporting this time one time. We have to wait like 10 minutes. We could also open up Bloomberg.
Yeah, Lombardy is always fast. I don't know. Maybe they have faster advantage.
Yeah. Yeah, they have a very...
Sorry again? I mean, or maybe their system is sophisticated.
Yes, I think so. They have one of the most, like the most sophisticated systems out there in the world for this. So that's the reason I think they are so fast. Okay. How should we do it? Should I... Should I have the stream of Bloomberg or how do we want to do it?
Yeah, you can share. Okay, I will actually share the whole. Wow, it's looking messy on my phone. I don't know if that's too large. I can spend. Can you see the...
I can hear a little bit more. No, I can't. I know. I can't.
for a posture, if you will. As you do in double B, single B, high yield, but where we've got structural protections in the capital structure and we've got hard assets underneath those securities. Ken, always a pleasure. Ken Shinoda, Portfolio Manager over at Double Line Capital. Instant analysis on the back of that Fed decision in the market. Read on that. Basically nothing's happening.
A little bit ho-hum, certainly when you take a look at the bond markets and the equity markets right now.
A full breakdown of all the day's market action and, well, a full breakdown of some big earnings crossing the wire in just a minute. The closing bell.
Bloomberg's comprehensive cross-platform coverage of the U.S. market close starts right now.
And right now we are two minutes away from the end of the training day. Romain Bostic alongside Katie Greifeld taking you through to that closing bell with the global simulcast. Carol Masser and Tim Sedeck join us now.
Welcome to our audiences across all of our Bloomberg platforms, television, radio, our partnership with YouTube.
Carol Master, we should point out, I know it's Fed Day, but you have about $8 trillion in market capitalization set to report earnings in just a moment.
Microsoft, Meta, Tesla, the biggest there. The Fed couldn't move the markets, but maybe those companies will.
I'm so glad you went there because just tracking the markets, you're right.
Nothing really happened, but I think these companies, because they are so big and there's so much in terms of their percentage in terms of the market cap and market overall, but also in terms of the narrative, where this has been happening, the AI, We'll see whether or not we get to go check on that and whether or not it's good or bad.
What does CapEx look like, especially from a company like Microsoft, a company like Meta Platforms, Katie?
If Microsoft is spending money, it's a signal that others are spending money with Microsoft. If Meta is spending money, well, investors don't necessarily love that as much.
Yeah, not necessarily in either of those two names, though, I will point out.
You take a look at Microsoft and Meta as compared to the other members of the Magnetism 7. You're two worst performers, so there's a lot of skepticism to your point, Tim, exactly on that CapEx and where it's going for both of those names.
I'm sorry. Did you two get evicted from your old studio? We tried to make a rent payment. All right. We hit the closing bells here in New York. We should also point out we get some other earnings as well out of Lamb Research, Las Vegas, and Whirlpool and IBM. But obviously Microsoft, Meta, and Tesla are going to be the big focus in just a few minutes. Unchanged on the S&P 500, up about a tenth of a percent on the NASDAQ, and the Russell 2000 lower on the day by about a half of a percent.
All right, guys.
Actually, what I just thought for the future, maybe we should not have those things here even in Notion, but maybe we should have one sheet, like one tab here in the sheet just focused on the numbers, where we prepare everything that we're expecting, like you did, but basically with a couple of more numbers, like all the other things. They expect us, like they report as well, like the total expenses, the ad repressions, the ad price and so on.
And then we quickly fill it out and we have everything like in one like single tab basically, all the key numbers, which also helps us then to create like longer timelines.
Oh, yeah, that's as well. Yeah, I think that's, like, maybe for next time we should do this. I'd like for the next earnings to run out.
Because right now I feel a little bit overwhelmed almost, like everything on so many different places. Yeah.
I'm very excited about the products that we're building. Our vision is building personal super intelligence. We're starting to see the promise of AI that understands our personal context, including our history, our interests, our content, and our relationships. A lot of what makes agents valuable is the unique context that they can see. And we believe that Meta will be able to provide a uniquely personal experience.
We're also working on merging LLMs with the recommendation systems that power Facebook, Instagram threads and our ad system. Our world-class recommendation systems are already driving meaningful growth across our apps and ads business, but we think that the current systems are primitive compared to what will be possible soon. Today, our systems help people stay in touch with friends, understand the world, and find interesting and entertaining content.
Glasses are the ultimate incarnation of this vision. They're going to be able to see what you see, hear what you hear, talk to you and help you as you go about your day, and even show you information or generate custom UI right there in your vision. Sales of our glasses more than tripled last year, and we think that they're some of the fastest growing consumer electronics in history. Billions of people wear glasses or contacts for vision correction.
And I think that we're at a moment similar to when smartphones arrived, and it was clearly only a matter of time until all those flip phones became smartphones. It's hard to imagine a world in several years where most glasses that people wear aren't AI glasses. For Reality Labs, we are directing most of our investment towards glasses and wearables going forward, while focusing on making Horizon a massive success on mobile and making VR a profitable ecosystem over the coming years.
I expect Reality Labs' losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward while continuing to execute on our vision. As we plan for the future, We will continue to invest very significantly in infrastructure to train leading models and deliver personal superintelligence to billions of people and businesses around the world.
As we navigate this, our North Star is building the best place for individuals to make a massive impact. So to do this, we're investing in AI native tooling so individuals at Meta can get more done. We're elevating individual contributors and flattening teams. We're starting to see projects that used to require big teams now be accomplished by a single very talented person. I want to make sure that as many of these very talented people as possible choose Meta as the place that they can make the greatest impact.
Let's begin with our segment results. All comparisons are on a year-over-year basis unless otherwise noted.
Our community across the family of apps continues to grow, and we estimate more than 3.5 billion people used at least one of our family of apps on a daily basis in December. Q4 total family of apps revenue was $58.9 billion, up 25% year over year. Q4 family of apps ad revenue was $58.1 billion, up 24% or 23% on a constant currency basis. In Q4, the total number of ad impressions served across our services increased 18%.
Within our Reality Labs segment, Q4 revenue was $955 million, down 12% year-over-year. As we noted on the last call, the year-over-year decline in Reality Labs revenue is due to us lapping the introduction of Quest 3S in Q4 of 2024, as well as retail partners procuring Quest headsets during the third quarter of 2025 to prepare for the holiday season, which was recorded as revenue in Q3. you Moving now to our consolidated results.
Infrastructure expense growth was driven by higher depreciation, cloud spend, and other operating expenses. We ended Q4 with over 78,800 employees, up 6% year over year, driven by hiring in priority areas of monetization, infrastructure, meta super intelligence labs, as well as regulation and compliance. Fourth quarter operating income was $24.7 billion, representing a 41% operating margin. Q4 interest and other income was $609 million, driven primarily by unrealized gains on our equity investments.
Turning now to the business performance. There are two primary factors that drive our revenue performance, our ability to deliver engaging experiences for our community, and our effectiveness at monetizing that engagement over time. On the first, we're continuing to drive incremental engagement from ranking and product improvements. Instagram Reels had another strong quarter with watch time up more than 30% year over year in the US.
Engagement is benefiting from several optimizations we made to improve the quality of recommendations, including simplifying our ranking architecture to enable more efficient model scaling. This unlocked the ability for our systems to consider longer interaction histories to better identify person's interests. On Facebook, video time continued to grow double digits year over year in the US, and we're seeing strong results from our ranking and product efforts on both feed and video services.
On Instagram, we grew the prevalence of original content in the U.S. by 10 percentage points in Q4, with 75% of recommendations now coming from original posts. Threads is also seeing strong momentum, again, benefiting from recommendation improvements. The optimizations we made in Q4 drove a 20% lift in Threads time spent. Turning to 2026, we see a lot of opportunity to drive additional gains. This includes scaling the complexity and amount of training data we use in our models, while continuing to make our systems more responsive to people's real-time interests.
you Turning to the second driver of our revenue performance, increasing monetization efficiency. The first part of this work is optimizing the level of ads within organic engagement. Here, our focus remains on tuning our systems to identify the right time and place to deliver ads. In some cases, this enables us to grow the overall level of ad load while preserving the user experience. However, an increasingly important part of this work is finding opportunities to drive incremental conversions within the same overall level of ad load by determining when a person is more interested in seeing an ad.
Moving to the second part of increasing monetization efficiency, improving performance for the businesses who use our tools. We're seeing very strong results from the ad performance investments we made throughout 2025, with year-over-year conversion growth accelerating through the fourth quarter. We expect the set of investments we're making in 2026 will enable us to drive further gains as we continue to integrate AI across all layers of the marketing and customer engagement funnel.
The combined revenue run rate of video generation tools hit $10 billion in Q4, with quarter-over-quarter growth outpacing the increase in overall ads revenue by nearly three times. We are also seeing very good results from our incremental attribution feature, which optimizes for incremental conversions in real time. Our latest model rollout in Q4 is driving a 24% increase in incremental conversions versus our standard attribution model, and this product has already achieved a multi-billion dollar annual run rate just seven months since launching.
The last area of our monetization work I'll cover is business messaging, where we're seeing strong momentum across our portfolio of solutions. Click to Message adds revenue growth accelerated in Q4, with the U.S. up more than 50% year-over-year, driven by strong adoption of our website to message ads, which direct people to a business's website for more information before choosing to launch a chat.
Paid messaging within WhatsApp continues to scale as well, crossing a $2 billion annual run rate in Q4. Finally, we're seeing good early traction with our business AIs in Mexico and the Philippines with over 1 million weekly conversations between people and business AIs now happening on our messaging platforms. This year, we will expand availability of our business AIs to more markets, while also extending their capabilities so they not only answer questions on topics like product availability, but can help people get things done right within WhatsApp.
We speak a lot about how AI is improving our products, but I'd like to take a moment to give an update on how it's changing the way we work. Mark mentioned our focus on making meta a place where individuals can have significant impact. A big focus of this is to enable the adoption and advancement of our AI coding tools where we're seeing strong momentum. Since the beginning of 2025, we've seen a 30% increase in output per engineer, with the majority of that growth coming from the adoption of agentic coding, which saw a big jump in Q4.
We have a strong net cash balance and expect our business will continue to generate to fund our infrastructure investments in 2026, which is... reflected in our expectations. Nonetheless, we will continue to look for opportunities to periodically supplement our strong operating cash flow with prudent amounts of cost-efficient external financing. which may lead us to eventually maintain a positive net debt balance.
Moving to our financial outlook. We expect our first quarter 2026 total revenue to be in the range of $53.5 to $56.5 billion. Our guidance assumes foreign currency is an approximately 4% tailwind to year-over-year total revenue growth based on current exchange rates. Turning to the expense and CapEx outlooks. We expect full year 2026 total expenses to be in the range of $162 to $169 billion. The majority of expense growth will be driven by infrastructure costs, which includes third-party cloud spend, higher depreciation, and higher infrastructure operating expenses.
The second largest contributor to total expense growth is employee compensation driven by investments in technical talent. This includes 2026 hires to support our priority areas, particularly AI, as well as a full year of expenses from 2025 hires. At a segment level, we expect expense growth to be driven by the family of apps with Reality Labs operating losses remaining similar to 2025 levels. We anticipate 2026 capital expenditures, including principal payments on finance leases, to be in the range of $115 to $135 billion, with year-over-year growth driven by increased investment to support our meta superintelligence labs efforts and core business.
And your second question, there's obviously a range of outcomes captured in the Q1 26 revenue outlook. It overall reflects our expectation for a strong quarter of growth. The range embeds an outlook for accelerated growth, and that's really underpinned by the strong demand that we saw through the end of Q4 and continuing into the start of 2026. Now, I will say we also expect foreign currency to be a four-point benefit to year-over-year growth.
On your first question, we do continue to be capacity constrained. Our teams have done a great job ramping up our infrastructure through the course of 2025, but demands for compute resources across the company have increased even faster than our supply. So we expect over the course of 2026 to have significantly more capacity this year as we add cloud, but we'll likely still be constrained through much of 2026.
MARK, ON YOUR SECOND QUESTION, I WANT TO MAKE SURE AND CLARIFY SOMETHING. SO I THINK IN THE QUESTION, YOU HAD SAID THAT OPERATING INCOME GROWTH IN '26 WOULD BE HIGHER THAN '25. I WANT TO MAKE SURE MY COMMENTS WERE SUPER CLEAR. IN 2026, WE EXPECT TO DELIVER OPERATING INCOME ABOVE 2025 OPERATING INCOME. SO THIS IS COMPARING ABSOLUTE DOLLARS, NOT YEAR-OVER-YEAR GROWTH. So to give some context on that, you know, we are going into 2026 with strong revenue growth at the start.
Of course, we are just a few weeks in, set against, you know, a healthy macro backdrop. So obviously hard to extrapolate the current trends to the full year. And, you know, there are many, many moving variables in the current landscape. We're really taking advantage of the current business strength to reinvest a lot of the revenue into what we see as very attractive investment opportunities in AI infrastructure.
Thanks. youI'm not sure I have anything else to add on the current progress on this. That's why I said up front that I think this is somewhat of an unfulfilling time to be answering some of these questions. We're about six months into building MSL. I'm very pleased with the quality of the team. I think we have the most talent-dense research effort in the industry and some of the early indicators look positive.
Justin, on your second question, we saw healthy year-over-year growth across all verticals in Q4, with the exception of politics as we lapped the U.S. presidential election last year. The online commerce vertical was the largest contributor to year-over-year growth. That was followed by professional services and technology. So in online commerce, year-over-year growth was strong. It was actually relatively consistent with Q3 levels, and that was broad-based across advertiser regions and sizes.
And once that got worked out, now the majority of the content is video. And one of the core ideas that We have had for a while is that that is not the end of the line or at video will continue to be here for a long time It's going to continue growing. It's not going anywhere just like photos and text In many ways continue to grow even as the market continues to grow beyond that But I don't think that video is the ultimate kind of final format and I think that we're going to get more formats that are more interactive and immersive, and you're going to get them in your feeds.
So you can imagine this. I mean, there's obviously a lot of details to fill in on this, but you can imagine being able to easily, through a prompt, create a world or create a game and be able to share that with people who they care about. And you see it in your feed, and you can jump right into it, and you can engage in it. And there are 2D versions of that. And Horizon, I think, fits very well with the kind of immersive 3D version of that.
It's multiple optimizations to our recommendation systems make more accurate predictions about what will be interesting to each person. And, you know, I talked a little bit about some of these, the specific instantiations on both Facebook and on Instagram. And we see, you know, a lot of headroom to improve recommendations in 2026, which we expect will drive additional engagement growth on both apps.
First, we plan on to continue scaling up our models and increase the amount of data we use, including a longer history of content interactions improve the overall quality of recommendations. We're also going to start validating the use of ad signals and organic content recommendations as we continue to work towards having a more shared platform for organic and ads recommendations over time. Second, we're going to continue to make recommendations even more adaptive to what a person is engaging with during their session.
So the recommendations we surface are more relevant to what they're interested in at that moment. And finally, we will work on more deeply incorporating LLMs into our existing recommendation systems, given their capability to more deeply understand content. And so this will, I think, in particular, be useful for content that has been more recently posted since there's less engagement data to base recommendations off of.
On the ad side, again, we have we've talked about a lot of the sort of model work in the ads world across Andromeda and Lattice and Gem. I'll touch maybe specifically, you know, on Gem and Q4, we extended Gem to cover Facebook Reels. Now it covers all major surfaces across Facebook and Instagram. We also doubled the size of the GPU cluster we use to train it. And in 2026, we're expecting to meaningfully scale up Gem training to an even larger cluster, increasing the complexity of the cluster.
So I think that this is a really fundamental thing where my guess is that Frontier AI for many reasons. some competitive, some safety-oriented games are not going to always be available through an API to everyone. So I think it's very important, I think, to be able to have the capability to build the experiences that you want if you want to be one of the major companies in the world that helps to shape the future of these products.
And we are, you know, we've just finished running our 2026 budgeting process, and we have funded a similar set of investments, which we expect will enable us to continue delivering strong revenue growth in 2026. Having said that, you know, I expect both full year reported, constant currency revenue growth to be below the levels in Q1 for a few reasons. First, we would expect that currency tailwinds will dissipate later in the year based on current rates.
Okay, two questions, please. Meta AI, any update on what you're seeing there in terms of engagement and usage? And do you think you're just starting to be able to apply improvements to that specific functionality? And then just real quickly on share repurchases, Susan, I don't think you bought any stock back in the quarter. It's been a while, maybe a year since you haven't bought anything back. You talked about capital allocation a little bit into the year.
And we're bringing that into Meta AI so that we can tailor responses to each person's personal and preferences. On your second question, which is about share purchase, share purchase levels will vary from time to time for a lot of reasons, including whether we believe there are areas that have a greater near-term need for capital. Right now, we think the highest order priority for the company is investing our resources to position ourselves as a leader in AI.
All right. Yeah. So what's your take? I think it's muted. I'm not sure if you... Blake. I think I'm no longer going to say that. Like... I think the goal was more positive. I'm not expecting. Oh, why exactly? Because now they are saying that like the compute capacity is not already online, so I was seeing like the first data center that will come online is at the end of 2026. And that's not like the largest one.
Okay. which I think is positive. The only negative I see is that like Sukhapur is one of the supreme religions there myself because like Now they seem not to be having a timeline on when this does or does. like they seem not to be in our and then at the same time, Saka Pagi saying that the That's really important for them to have those brand new models. Okay. Yeah.
I did not think about it yet, but I also noted down that CapEx They say they will use cloud before, right? in 2026 before their own capacity comes online. Yeah, yeah, they already, I think they already like signed a deal with some company. With Google or like with who did they sign deals? I think Google maybe? Yeah, I don't remember at the moment, but I think the value was around 40 billion for my whole years.
Yeah, so like... So like when I use 27% growth rate, that's when I...
Thank you. Yeah. Yeah, I'm sorry to hear this. It's just that I'm not very good at it. Yeah, I think I will probably not change anything for me. Yeah, I will sleep about it, I think. If you have more arguments, also add them. No. Where do we add observations as of now? Simply in the forum when you report on the earnings call or on the results? That you had your assessment? Yeah.
I think that's okay or you can also add it here somewhere if you want. Like, I don't know. I want to assessment recommendation Ah yeah, here you also say it, okay nice. Yeah. Yeah, if you want you can add it here or like simply only in the forum. I think that's up to you. Okay, I think that's it. I think that's up to you. Okay, I think that's it. Thanks a lot and I will see you on Friday. Okay.