Meta gains after Zuckerberg predicts ‘really big year’ in AI

The company expects first-quarter sales of $39.5 billion to $41.8 billion, it said Wednesday. The midpoint missed the $41.7 billion average analyst estimate, according to data compiled by Bloomberg.

The owner of Facebook and Instagram also reported better-than-expected fourth-quarter sales of $48.4 billion, beating the $47 billion that Wall Street expected on average. Advertising from Meta’s social networks, like Instagram and Facebook, continue to drive the vast majority of sales.

Zuckerberg said he also expects that this year, “it becomes possible to build an AI engineering agent that has coding and problem-solving abilities of around a good mid-level engineer. And this is going to be a profound milestone and potentially one of the most important innovations in history, as well as over time.” He is hoping Meta can achieve it.

Meta gained 4.5% to $707 per share in extended trading Wednesday, after closing at $676.49 in New York. The company has gained more than 15% so far this year.

Capital expenditures in 2024 were $39.2 billion, exceeding the $38.2 billion that analysts expected on average. Last week, Zuckerberg said in a Facebook post that the company would invest as much as $65 billion on AI-related projects in 2025, as well as its core business.

The biggest question for Meta’s year is about whether that big bet will pay off, said Emarketer principal analyst Jeremy Goldman in a note on Wednesday. DeepSeek, a Chinese AI startup, released a model that it says used a fraction of the cost and computing power to train — news that caused US and European tech stocks to lose nearly $1 trillion in value Monday. DeepSeek’s latest model, he said, “threw a wrench in the works,” and potentially makes Meta’s AI spending look “bloated, not visionary.”

While Meta was spared from the market turmoil because it doesn’t make money off of its AI models directly, its commentary will shape how investors look at the industry’s spending overall. Like DeepSeek, Meta’s artificial intelligence technology, known as Llama, is open source, meaning it lets other companies access and build on top of it. Wall Street viewed the DeepSeek developments as a positive for Meta, and analysts suggested that Meta could learn from its Chinese competitor and possibly bring AI costs down.

Meta is spending big not just for AI, but for a hardware push that requires upfront investment on products that may or may not take off. The Reality Labs devices group, which has lost tens of billions of dollars since 2019, reported sales that were in line with analysts’ estimates. Reality Labs is working on developing Oakley-branded smart glasses for athletes and plans to release new high-end glasses with a built-in display, Bloomberg reported this month. It also is testing new wearable devices such as watches and camera-equipped earbuds.

Meta plans to cut 5% of its staff in the coming weeks. Zuckerberg said the effort would target “low performers” and make space for new hires, according to a memo reviewed by Bloomberg. The effort could impact roughly 3,600 jobs. Affected US-based employees are expected to be notified on Feb. 10, while those based in other countries will be informed at a later date. By the end of this performance cycle, which runs through February, the company will have seen a total of 10% attrition over the previous year, including an additional 5% of staff that departed from the company last year.

Zuckerberg attributed much of his bullishness to President Donald Trump’s new administration and its favorable view of tech. “We now have a US administration that is proud of our leading companies, prioritizes American technology winning, and that will defend our values and interests abroad,” he said. “I am optimistic about the progress and innovation that this can unlock.”

The CEO has made sweeping changes to the company since the start of the year, many of which have served to better align Meta with the new Trump administration.

He elevated Joel Kaplan, a longtime Republican strategist, to chief global affairs officer and tapped Dana White, a Trump ally and CEO of the Ultimate Fighting Championship, for Meta’s board. Zuckerberg also announced plans to end US-based fact-checking on Meta’s social networks, and changed the company’s hateful conduct policy to allow more flexibility around “insulting language” aimed at immigrants and transgender people. He rolled back diversity and inclusion efforts, and moved members of Meta’s civil rights team to other parts of the company.

Meanwhile, Zuckerberg has appeared alongside Trump and his allies. Earlier this year he visited Trump at his Florida club, Mar-a-Lago, and later joined the president at his inauguration, co-hosting a black-tie reception in Trump’s honor. Zuckerberg also went on podcastThe Joe Rogan Experience in January, where he criticized the Biden administration and called for more “masculine energy” in corporate America.