Meta Stock Jumps Despite Soaring Capex, Expense Forecast

Investor sentiment on Meta (META) was cautious going into the Q4 earnings report, focusing on 2026 expense and revenue guidance. Meta's Q4 earnings beat analysts' expectations, with strong revenue growth in advertising and the Family of Apps. However, Reality Labs continued to report operating losses, impacting the overall operating margin. A key concern was the significant increase in capital expenditures (capex) for 2026, which far exceeded estimates. Management projected substantial expense growth, primarily due to infrastructure investments and employee compensation, especially in AI. Despite the initial negative reaction to the higher spending, the stock saw a dramatic recovery in after-hours trading. This surge suggested investors might be overlooking the spending due to Meta's robust ad revenue growth. The company's Q1 2026 revenue guidance also surpassed expectations, bolstered by a tailwind from foreign exchange. Therefore, the market appears to be balancing strong short-term performance with concerns about the long-term returns from aggressive investment. The core question remains unanswered: what returns are expected on the enormous capex spending?