Meta sends mixed signals as quarterly sales beat estimates but outlook muted

By Katie Paul and Jaspreet Singh

(Reuters) -Meta Platforms beat Wall Street expectations for fourth-quarter revenue on Wednesday but predicted sales in the current first quarter may not meet forecasts, sending mixed signals about how its bets on pricey artificial intelligence-powered tools are paying off.

The Facebook and Instagram parent company expects first quarter revenue between $39.5 billion and $41.8 billion, compared with analysts' average estimate of $41.72 billion, according to data compiled by LSEG.

It reported revenue of $48.4 billion for the fourth quarter of 2024, well above analysts' estimate of $47.0 billion.

Meta shares were flat after the market closed but rose as CEO Mark Zuckerberg spoke optimistically about Meta's AI initiatives and how the launch of Chinese company DeepSeek's models, which tanked global markets this week, reinforced his conviction that open source AI is the right strategy.

"There's going to be an open source standard globally," Zuckerberg said on a conference call. "It's important that it's an American standard."

The forecast raised fresh questions about Meta's capital spending. The company relies on its core social media ads business to cover the costs associated with its AI ambitions and investments in "metaverse" technologies like smart glasses and augmented reality systems.

Last week, Zuckerberg announced that Meta plans capital expenditure of as much as $65 billion in 2025 to expand its AI infrastructure, while also increasing hiring for AI roles.

On Wednesday, Meta said it expected total expenses for 2025 to be in the range of $114 billion to $119 billion, up from a total of $95 billion in 2024.

"Meta's gangbusters Q4 results clearly demonstrate that ad revenues remain the company's lifeblood. That said, the biggest question heading into 2025 isn't about today's earnings—it's about whether Mark Zuckerberg's $60–65 billion AI infrastructure bet will pay off," said Jeremy Goldman, principal analyst at eMarketer.

Family daily active people (DAP), a metric Meta uses to track unique users who open any one of its apps in a day, rose about 5% from a year earlier to 3.35 billion.

Meta's results come after DeepSeek's launch of its latest AI models triggered a selloff in global tech stocks on Monday on concerns about rising AI costs in the U.S.

DeepSeek has said its models either match or outperform top U.S. rivals at a fraction of the cost, including Meta's own Llama models, challenging the prevailing view that scaling AI requires vast computing power and investment.

Zuckerberg said it was too early to tell how DeepSeek's emergence globally will impact Meta's investment and capital expenditure strategy, while noting that Meta's AI teams were already integrating the Chinese company's insights into their plans.

"There are a number of things that they have advances that we will hope to implement into our systems," Zuckerberg said, addressing questions about DeepSeek.

The breakthrough could heighten scrutiny from investors worried about Meta's heavy spending on AI and metaverse devices, though it may also benefit the world's biggest social media company if it successfully brings down the cost of building and supporting the models.

Meta continues to hemorrhage money at its metaverse-oriented Reality Labs unit, which beat sales expectations but still lost about $5 billion in the fourth quarter.

Zuckerberg told analysts he believes the business opportunity for Meta in AI lies beyond 2025.

Meta — among the top buyers of Nvidia's sought-after AI chips — aims to end the year with over 1.3 million graphics processors (GPUs) and bring about 1 gigawatt of computing power online, Zuckerberg said on Friday in a Facebook post outlining the company's 2025 spending goals.

The company would continue buying such chips while also working on internally designed custom silicon, said Meta CFO Susan Li. Meta aims to use its own chips to train its AI ranking and recommendations systems - which determine what appears in users' feeds - by next year, she said.

Zuckerberg said earlier this month that Meta would lay off 5% of its "lowest performers" and warned employees about more such job cuts this year to raise performance.

(Reporting by Katie Paul in New York and Jaspreet Singh in Bengaluru; Editing by Maju Samuel, Kenneth Li, David Gregorio and Shri Navaratnam)