Why is the Meta share price rising after Q4 earnings?
The Meta Platforms (NASDAQ:META) share price is rising in extended trading after the companyâs Q4 results on Wednesday (28 January). The question is: why?
After its Q3 update, the stock fell as the firmâs huge artificial intelligence (AI) spending made investors nervous. That looks set to continue, but the response has been very different this time.
Q4 earnings
Metaâs results for the fourth quarter of 2025 were very strong. Revenues were up by 24% and earnings per share grew 11% â but these arenât the numbers investors were really waiting for.
The market’s focus recently has been the companyâs plans to keep investing in AI data centres. And while capital expenditures were up 49% in Q4, thereâs more to come in 2026.
Meta announced plans to increase spending from $72bn to somewhere between $115bn and $135bn. Thatâs more than double the companyâs net income from 2025.
When the firm announced a $5bn increase in capital expenditures in Q3, the stock fell 11%. But investors seem to be much more positive this time â and I have a theory about why.
Whatâs changed?
I think the big difference is a change in tone from CEO Mark Zuckerberg. That might not sound like much, but it might well be at the core of how investors are viewing Meta shares at the moment.
In Q3, Zuckerberg spoke about spending to avoid the risk of being underinvested in AI. But the idea that the company was essentially spending because it had no choice didnât go over well.
This time, the CEO was much more positive about the purpose of the AI investment. The emphasis was more on the kind of products Meta hopes to launch, rather than losing ground.
From an investment perspective, that can make a big difference. Itâs one thing for the firm to spend $70bn just to avoid being left behind, but another for it to have $130bn worth of opportunities.
What should investors think?
Meta is encouraging investors to see its higher spending as an investment opportunity, rather than a necessary cost. But Iâm not entirely sure Iâm buying it and that makes me wary.
The firm has also been borrowing to finance its AI spending and this also changes the equation. Getting a bad return on cash is one thing, but taking on debt raises the stakes for investors.
Importantly though, the firm expects operating income to grow in 2026. Given the increase in already huge spending commitments, thatâs both impressive and reassuring.
This â along with some very impressive results in Q4 â highlights the strength of Metaâs core advertising business. But thatâs something investors probably didnât need reminding of.
AI risks and rewards
Meta is increasing its capital expenditures, but the stock market is taking the news well â certainly compared to the response at the end of Q3. And I think there are two main reasons for this.
In my view, the more positive commentary provided by Mark Zuckerberg â as an opportunity, rather than a threat â is one reason. The other is the strong operating income guidance for 2026.
Both of these are encouraging, but I think a rising share price ought to make investors cautious. The stock is definitely one to keep an eye on, but thatâs about as far as Iâm willing to go right now.
The post Why is the Meta share price rising after Q4 earnings? appeared first on The Motley Fool UK.
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Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Meta Platforms. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
