The biggest spender in tech just got permission to spend even more.
jumped as much as 10% Thursday after delivering a fourth quarter that beat on every metric that matters. Revenue hit $59.9 billion, crushing the $58.4 billion consensus by 2.5%. Earnings of $8.88 per share topped the $8.16 estimate by 9%. And the forward guidance that usually tanks stocks? It sent Meta soaring.
The company told Wall Street it plans to spend between $115 billion and $135 billion on AI infrastructure in 2026—nearly double the $72.2 billion it deployed last year. Analysts had expected around $110 billion. Instead of selling off on the capex shock, investors bid the stock up.
That’s the market telling you something important.
The AI Ad Machine Is Working
Meta’s fourth quarter proved that AI-driven advertising isn’t just a promise—it’s printing money.
Ad revenue rose 24% year-over-year to $58.1 billion, representing 97% of total company revenue. Ad impressions increased 18% while average price per ad climbed 6%. That combination—more ads shown at higher prices—is the dream scenario for any advertising platform.
The engine behind it: AI recommendation systems that have transformed how content reaches users. Instagram Reels watch time jumped more than 30% year-over-year in the U.S., driven by AI that keeps users scrolling longer. Longer sessions mean more ad inventory. Better targeting means higher prices. The flywheel is spinning.
“We are now seeing a major AI acceleration,” CEO Mark Zuckerberg said on the earnings call. He wasn’t talking about chatbots or superintelligence. He was talking about the AI already embedded in every feed, every ad, every recommendation across Meta’s 3.58 billion daily active users.
Why Wall Street Is Blessing the Spending Spree
A year ago, Meta’s capex guidance sent the stock tumbling. In October 2024, when the company hinted at “notably larger” 2026 spending, shares dropped 8% after hours. This time, Meta put an even bigger number on the table—and got a standing ovation.
The difference is receipts.
Meta’s Q1 2026 revenue guidance of $53.5 billion to $56.5 billion blew past the $51.4 billion consensus. That implies 23% to 27% growth, well above the “low-20s” Wall Street had modeled. When your ad business is accelerating while you’re already generating $43.6 billion in annual free cash flow, investors will fund your ambitions.
Bernstein analyst Mark Shmulik called Meta’s advertising a “rare win-win-win”—revenues rising, ads improving user experience, and sellers finding audiences more efficiently. UBS raised its price target to $872, citing “stronger signals of AI benefits” ahead. Canaccord Genuity went to $930.
The consensus is clear: Meta has earned the right to spend.
The Microsoft Contrast
Meta’s stock surge Thursday came against a brutal backdrop for Big Tech. cratered 11% despite beating estimates, punished for slowing Azure growth and ballooning AI capex. ServiceNow (NYSE:NOW) dropped 12%. The software sector entered bear market territory.
So why did Meta escape the carnage?
Three reasons. First, Meta showed revenue acceleration, not deceleration. Microsoft’s Azure growth slowed from 40% to 39% with guidance for 37-38%. Meta’s ad revenue accelerated to 24% with Q1 pointing even higher.
Second, Meta’s AI spending is immediately monetizable. Every dollar Meta invests in recommendation systems translates directly to ad performance. Microsoft’s AI capex goes into infrastructure that won’t fully monetize for years.
Third, Meta has a cash machine that throws off $115 billion in annual operating cash flow. It can absorb the spending without straining its balance sheet, which ended the year with $81.6 billion in cash and just 0.15 debt-to-equity.
The Reality Labs Question
Not everything in Meta’s report was pristine. Reality Labs—the metaverse and VR division—posted a $6.02 billion operating loss in Q4, worse than the $5.67 billion analysts expected. The segment has now lost roughly $60 billion since 2020.
But investors appear to have moved on. Earlier this month, Meta laid off over 1,000 Reality Labs employees, signaling a strategic pivot. Zuckerberg told analysts this year will be “the peak” of Reality Labs losses before they “gradually reduce going forward.”
The market’s verdict: Reality Labs is a rounding error next to the advertising juggernaut. Meta generated $83.3 billion in operating income in 2025. The VR losses, while massive, represent less than 8% of that haul.
What to Watch
Three catalysts will determine whether Meta’s rally has legs.
AI product pipeline. Zuckerberg talked about “personal superintelligence” and Meta AI reaching one billion users. New products like Business AI, Threads advertising, and WhatsApp paid messaging could unlock entirely new revenue streams in 2026.
Reels monetization. The short-video format is now driving 30%+ engagement growth. If Meta can push Reels ad loads higher without killing watch time, the revenue upside is substantial.
Regulatory overhang. Meta faces trials in the U.S. related to youth safety, and the FTC has appealed its antitrust case loss. Any adverse ruling could create headline risk, though the core business appears insulated.
The Bottom Line
Meta just delivered the quarter every AI investor has been waiting for—proof that massive infrastructure spending can coexist with accelerating revenue and expanding margins. The company expects 2026 operating income to exceed 2025 despite nearly doubling capex.
At $720 per share, Meta trades at roughly 25x forward earnings with a path to 25%+ revenue growth. Forty-three analysts rate it a “Strong Buy” with an average target of $825—15% upside from current levels. The highest target, $930 from Canaccord Genuity, implies 29% upside.
The AI bet that almost killed Meta in 2022 is now the reason it’s thriving. Zuckerberg gambled that embedding AI into every corner of the advertising business would transform the company. Four quarters of acceleration later, Wall Street is all in.