Social media platforms have been in focus in recent months as potential beneficiaries of a TikTok ban in the US. One of the biggest platform owners in the social media space is Meta Platforms Inc (NASDAQ: META).
The company reported Q4 2024 earnings on Wednesday (29 January) after the market closed. Meta delivered stellar earnings that sent its stock soaring 5% in after-hours trading before settling up 2.3%.
The tech giant beat Wall Street’s expectations on revenue, profit, and user growth but its soft Q1 2025 guidance left some investors cautious.
So, what does this mean? Is Meta still a buy for investors after its impressive run, or are there reasons to be cautious?
Meta’s Growth Is Still Strong; AI a Core Driver
Meta’s revenue jumped 21% year-on-year to US$48.4 billion, easily topping Wall Street’s estimates of a top line of US$47.0 billion.
Earnings per share (EPS) came in at US$8.02, smashing expectations. User growth also remained robust, with daily active users (DAUs) across Meta’s family of apps hitting 3.3 billion, a 5% year-on-year increase.
Meanwhile, CEO Zuckerberg made it clear that 2025 will be the year Meta AI becomes an essential part of users’ lives. With over 700 million active users already engaging with Meta AI, the company is positioning itself to lead in the AI assistant space.
Meta’s latest Llama models are expected to set a new benchmark in open-source AI, potentially challenging proprietary models from OpenAI and Google.
Digital Ads Red Hot
Despite economic uncertainty, Meta’s ad business remains a powerhouse. Ad impressions grew 6%, while the average price per ad surged 14%.
The company’s AI-driven ad tools, like Advantage+, helped advertisers improve targeting and efficiency, driving strong revenue growth.
On the loss making side, Reality Labs – Meta’s metaverse division – posted a US$5 billion operating loss, but revenue in the segment grew slightly to US$1.1 billion. The success of Ray-Ban Meta AI glasses suggests that smart glasses could play a major role in Meta’s future computing ambitions.
The cost outlook is where a nasty surprise awaited investors. Meta plans to spend US$60 billion to US$65 billion on capital expenditures in 2025, up significantly from last year’s forecast of US$52 billion. The company is aggressively investing in AI infrastructure, custom silicon, and data centres – all of which could provide a long-term competitive edge but where the short-term payoff isn’t clear.
Is Meta Stock Still Worth Owning?
Meta’s continued dominance in digital advertising and AI makes it a compelling investment for those with a long-term horizon. Despite high spending, the company is executing well and delivering strong profits.
Meta’s revenue guidance for Q1 2025 stood in a range of US$39.5 billion to US$41.8 billion. This was below some analyst expectations and disappointed some investors. If the stock pulls back due to short-term concerns, it could certainly create a buying opportunity.
While Meta AI has gained traction, the company has yet to fully monetise it and investors should watch for how Meta integrates AI into its ads business but, more importantly, whether new revenue streams actually emerge.
According to Petar Petrov, Senior Equity of Analyst of TradingKey:
"Meta posted strong quarter results. Q4 Revenue was roughly in line with expectations ($48.39 billion vs. $47.04 billion expected), and EPS confidently exceeded expectations ($8.02 vs. $6.77 expected).
The backbone of Meta, its advertising business, demonstrated resilience amid increasing competition, with a 5% increase in daily active people across Meta’s apps. Revenue growth for the quarter is 21% year-on-year, driven by a 6% increase in ad impressions and a 14% increase in average price per ad. This can be explained by 1) the increased use of AI, improving ad optimization and engagement, and 2) the robust macro environment, as companies are willing to spend more on advertising.
However, the concerns about overspending remain as the company expects higher levels of operating expenses than previously expected. Also, the virtual reality venture, Reality Labs posted a loss of 5 billion USD, the biggest so far."
What is Next for Meta?
Meta is firing on all cylinders, delivering strong earnings, AI innovation, and digital ad growth. While high spending and regulatory risks remain, the company’s long-term vision is compelling.
Investors looking for exposure to AI, digital advertising, and the future of computing can consider Meta as a strong candidate for inclusion in their tech portfolio. For those waiting on a better entry point, any near-term weakness following Meta’s weaker-than-expected Q1 2025 guidance could present a buying opportunity.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
