Down about 25% from an all-time high of nearly $800, shares of Meta Platforms (NASDAQ: META) have been slammed. As of this writing, the stock has slipped below $600.
Yet the underlying business is putting up phenomenal numbers. The company not only posted strong fourth-quarter revenue growth but also guided for impressive first-quarter results.
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Is this a buying opportunity? Maybe in a very small dose, but I wouldn’t load up here.
Meta’s recent Q4 financial results were impressive, showcasing a business that continues to dominate the digital advertising landscape.
The company’s advertising revenue was $58.1 billion in the quarter — up 24% from the year-ago quarter. This advertising strength across its core social media platforms helped drive a robust operating margin of 41%, resulting in nearly $25 billion in operating income for the period.
While this operating margin is impressive in a vacuum, it’s notably down from 48% in the year-ago quarter as the company’s costs and expenses surge amid a major investment cycle.
Highlighting Meta’s recent deleveraging, the company’s earnings per share grew at a much slower rate than revenue, rising just 11% year over year.
And free cash flow increased — but also grew more slowly than revenue. The key cash flow figure was about $14.1 billion, up from about $13.2 billion in the year-ago quarter.
However, even though costs are weighing on Meta’s earnings and free cash flow, the company’s growth profile is actually strengthening.
The midpoint of the company’s first-quarter guidance range calls for revenue growth of about 30%.
“We are now seeing a major AI acceleration,” explained CEO Mark Zuckerberg in the company’s fourth-quarter earnings call. “I expect 2026 to be a year where this wave accelerates even further on several fronts.”
But securing artificial intelligence (AI)-driven growth is costly.
“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 and talent,” explained Meta chief financial officer Susan Li during the company’s fourth-quarter earnings call.
In Q4, Meta’s costs and expenses soared 40% year over year, far outpacing its 24% year-over-year growth rate.
