Meta doubles down on AI, flags higher costs and sustained Reality Labs losses
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Meta Platforms doubled down on artificial intelligence in 2025, but the scale of those investments is starting to weigh on margins and losses at its experimental businesses, even as the core advertising engine stayed strong.
“We expect full year 2026 total expenses to be in the range of $162-169 billion,” said CFO Susan Li in Q3 commentary.
The company reported a $19.2 billion operating loss at Reality Labs for the full year, wider than the $17.7 billion loss a year ago, underlining the cost of long-term bets on AI-driven hardware, virtual reality and mixed reality. For the year, net income slipped 3% to $60.46 billion, despite strong revenue growth, as expenses rose sharply on infrastructure and talent.
Meta’s leadership is clear about where the money is going. “The majority of expense growth will be driven by infrastructure costs,” Li said, pointing to higher cloud spend, depreciation and operating expenses tied to AI systems. Employee compensation was the second-biggest driver, reflecting aggressive hiring for AI priorities.
January 2026
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That spending push came alongside solid top-line growth. Revenue rose 22% to $200.97 billion in 2025, led by advertising across Facebook, Instagram and WhatsApp. In the December quarter alone, revenue jumped 24% year-on-year to $59.9 billion, helped by an 18% increase in ad impressions and a 6% rise in average ad prices.
Still, costs grew faster. Total expenses climbed 24% for the year to $117.7 billion, and 40% in the fourth quarter, compressing operating margins. Full-year operating margin stood at 41%, down from 42% a year earlier, while fourth-quarter margin fell sharply to 41% from 48%.
The contrast between Meta’s cash-generating core and its loss-making future bets remains stark. The Family of Apps business delivered $102.5 billion in operating income for the year, more than offsetting Reality Labs losses. Daily active people across Meta’s apps rose 7% year-on-year to 3.58 billion in December, reinforcing advertiser demand.
AI-led growth
Looking ahead, Meta is signalling even heavier AI investment. The company expects 2026 capital expenditure of $115–135 billion, up sharply from $72.2 billion in 2025, largely to support its “Meta Superintelligence Labs” and core AI infrastructure. “Despite the meaningful step up in infrastructure investment, in 2026 we expect to deliver operating income that is above 2025 operating income,” Li said.
For the March quarter, Meta guided revenue of $53.5–56.5 billion, with foreign exchange expected to provide a 4% tailwind. Full-year expenses are projected at $162–169 billion, suggesting margin pressure will continue.
Regulatory and legal risks also loom. Li said the company continues to face scrutiny in the EU and the US, including youth-related issues and multiple trials scheduled this year, some of which “may ultimately result in a material loss.”
The tech giant is betting that scale, data and long-term AI capabilities will keep its core business resilient even as spending accelerates.