Shares of Meta Platforms fell 3.2% on Wednesday, extending a post-earnings pullback despite the company reporting strong fourth-quarter results, as investors weighed accelerating costs tied to artificial-intelligence expansion against already lofty expectations baked into the stock.
The decline followed a quarter in which Meta posted revenue growth of 24% from a year earlier, driven by higher ad impressions and a 6% increase in average ad prices. Yet expenses climbed 40% year over year in the period, reflecting heavier capital outlays for AI infrastructure and talent as the company ramps up investment ahead of its Superintelligence Labs initiative.
For 2025, Meta spent $72.2 billion on operations and emerging projects and has guided that capital expenditures could reach as high as $135 billion in 2026. The scale of that spending has sharpened investor focus on margins, particularly as megacap technology stocks face reduced tolerance for prolonged margin compression.
At Needham, analyst Laura Martin cautioned that Meta shares are "priced for perfection," warning the stock could fall by as much as 15% if the company fails to meet growth targets. She flagged concerns that much of the spending is irreversible in the near term, increasing downside risk should revenue momentum soften.
Meta has guided for 30% revenue growth in the first quarter of 2026, but Needham expects operating margins to narrow to 30% this year from 40% in 2025. Martin emphasized that her concern centers on timing rather than Meta's competitive position, noting that broader ad-tech performance remained strong across the sector.
Wall Street's broader stance remains supportive. Analysts, on average, maintain a "strong buy" consensus on Meta with a 12-month mean price target of $855.88, implying more than 20% upside from current levels. Targets range widely, from about $700 on the low end to $1,144 at the high end, underscoring diverging views on how quickly AI investments will translate into returns.
Freedom Capital Markets reiterated its "buy rating" and raised its price target to $825 from $800, citing record holiday-season demand and AI-driven improvements in ad efficiency. The firm said topline growth benefited from enhanced targeting tools rolled out across Meta's platforms.
Beyond spending concerns, investors are monitoring a growing list of legal challenges. Meta is facing a patent infringement lawsuit from Solos Technology over smart-glasses technologies, with the plaintiff seeking multibillion-dollar damages and potential injunctions. The company is also set to go to trial in New Mexico over allegations related to child exploitation and failures to safeguard minors on its platforms.
Corporate governance and insider activity have also drawn attention. Meta Chief Operating Officer Javier Olivan sold 517 Class A shares days after the earnings release at an average price of $714.60, for proceeds totaling $369,448, according to regulatory filings.
Under Chief Executive Mark Zuckerberg, Meta has doubled down on AI as a long-term growth engine, a strategy analysts say positions the company well against peers such as Alphabet and The Trade Desk. The near-term question for investors is whether Meta can deliver the growth required to justify a valuation that leaves little room for error.
