Meta’s fourth-quarter revenue rose 21% to $48.4bn, ignoring exchange rate impacts. That was better than expected, driven by advertising revenue growing ahead of forecasts.
Operating profit was up 43% to $23.4bn thanks to strong cost control, with margins rising from 41% to 48%.
The number of people using at least one of Meta’s apps on a daily basis rose 5% to 3.35bn. Advertising prices were up 14%.
Net cash, including lease liabilities came to $28.8bn. Free cash flow rose 14% to $13.2bn, despite capital expenditure (capex) rising by 88%.
First-quarter revenue is expected to be in the range of $39.5-41.8bn, reflecting 11-18% growth when ignoring exchange rates. Capex guidance for the full year is $60-65bn (2024: $39.2bn), as artificial intelligence (AI) investment ramps up.
The shares were up 2.2% in pre-market trading.
Our view
Meta’s fourth-quarter results capped off a stellar year for the tech giant, and 2025 is shaping up to be another good one. Revenue looks set to slow slightly, but it’s still forecast to be racing along at a mid-teen rate as the core advertising business looks very strong. Promises to invest even more in the AI buildout to help maintain its competitive advantage have been welcomed with open arms.
Taking a step back, recent changes at Meta have been profound. Since 2022 quarterly revenue has grown 50% while its headcount has dropped by 14%. This period of getting lean is what’s enabled Meta to go all guns blazing on the AI opportunities laid out before it.
Mark Zuckerberg has been very clear that he’d rather overspend now than risk losing its leadership position. We think this approach is the right one, but it comes with risks. The cash required to build and train AI models is eye-watering, and while the impact of all this investment on the profit line is spread over time, if revenue doesn’t keep pace, margins will eventually come under pressure.
On that point, we are starting to see tangible evidence that the core advertising business is benefiting from AI. Advertising growth comes in two parts, price and volume. Meta’s scale and growing user base helps drive the volume equation.
The price side requires advertisers to feel they’re getting more bang for their buck. That’s where AI comes in, helping to optimise ad-targeting, engagement and efficiency. We’ve heard anecdotal stories of how these tools help advertisers, but seeing price now as a major part of ad-revenue growth suggests they’re delivering genuine improvements for Meta’s customers.
Meta likes to split AI into two buckets. Core AI is building the tools to help engage users and improve ad performance. Then there’s the generative AI, the more speculative side of things, which involves new tools like Meta AI, the large language model embedded into Meta’s apps. These are in a much earlier phase and, along with the ongoing investment into Metaverse products, are where we see the biggest risks.
We see Meta as well placed to drive AI-related growth and continue its dominance in the ad and social networking world. The key risk to manage is the investment cycle. Meta has gotten ahead of itself in the past, and investors won’t want to see that happen again.
Environmental, social and governance (ESG) risk
The technology sector is generally medium/low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Other key risks include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, Meta’s overall management of material ESG issues is average.
Meta's structure limits the power of minority shareholders in company decisions. While the company’s privacy committee oversees its compliance with a significant 2019 settlement, Meta still faces ongoing lawsuits and fines for privacy issues, pointing to management gaps. Concerns also persist around fake news, user safety, and divisive content, with recent hearings suggesting that algorithm changes may have worsened these problems.
Meta key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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