Does Meta Need a Decade of Efficiency?

Mark Zuckerberg declared 2023 the "year of efficiency" aft Meta Platforms (NASDAQ:META) shed 21,000 employees and tightened spending. Operating margins expanded from 25% to 42%, and the banal tripled. But Meta guided superior expenditures to $70-72 cardinal for 2025, up from $30 cardinal successful 2024. That's an arms race.

Third 4th gross deed $51.24 billion, up 26% year-over-year. Operating income reached $20.54 cardinal astatine a 40% margin. Net income collapsed 83% to $2.71 cardinal owed to a $15.93 cardinal one-time taxation charge. Strip that retired and adjusted net would beryllium $18.64 billion. Capital spending surged 135% to $19.37 cardinal successful a azygous quarter.

Zuckerberg laid retired the logic connected the Q3 net call:

It's wide that determination are a batch of caller opportunities to usage caller AI advances to accelerate our halfway concern that should person beardown ROI implicit the adjacent fewer years, truthful I deliberation we should put much determination [...] our AI investments proceed to necessitate superior infrastructure, and I expect to proceed investing importantly determination too.

That's the CEO explicitly saying "we should put more," not "we should support efficiency." Meta is grooming Llama 4 connected a clump exceeding 100,000 H100 GPUs, larger than thing competitors person disclosed. CFO Susan Li warned of "significant acceleration successful infrastructure disbursal growth" for 2026 arsenic depreciation and operating costs from the expanded fleet deed the income statement.

Meta's 40% operating borderline exceeds Alphabet (NASDAQ:GOOGL) astatine 30.5%. The company's 82% gross borderline provides cushion. Meta AI present has 500 cardinal monthly progressive users, and AI-driven provender improvements drove an 8% summation successful Facebook clip spent and 6% connected Instagram. Over 1 cardinal advertisers utilized generative AI tools to make 15 cardinal ads past month, with a 7% assistance successful conversions.

But if infrastructure spending doubles portion gross maturation holds astatine 26%, thing has to give. Operating expenses are projected astatine $116-118 cardinal for 2025, up 22-24%. Reality Labs losses proceed to widen. The institution is adding costs everyplace AI touches.