To The Moon

Earnings Report Highlights:

Meta Platforms ( $Meta Platforms, Inc.(META)$ ) has just announced its Q4 earnings, revealing revenue of $48.39 billion, up 21% year-over-year, and a net income of $20.84 billion, a significant 49% increase. Earnings per share (EPS) came in at $8.02, surpassing analysts' expectations of $6.77.

• Surprise: The user growth exceeded forecasts with daily active users reaching 3.35 billion compared to the expected 3.32 billion. Additionally, Meta's AI chatbot, Meta AI, saw its subscriber base grow to over 700 million monthly active users, a notable surprise given the rapid adoption.

• Forward Guidance: Meta anticipates Q1 2025 revenue between $39.5 billion and $41.8 billion, suggesting an 8%-15% year-over-year growth. No full-year guidance was provided, but the company emphasized strong revenue growth potential through 2025, driven by AI advancements.

• Commentary: CEO Mark Zuckerberg highlighted 2025 as a pivotal year for AI at Meta, expressing confidence in reaching over 1 billion users with their AI assistant. Despite the high capital expenditure planned for AI, Meta's leadership sees these investments as crucial for long-term growth and market dominance.

Meta surged 2.29% in the post-market session

Forward Guidance and AI Investment Plans:

Looking ahead, Meta has announced an ambitious capital expenditure plan for 2025, projecting spending between $60 billion and $65 billion. This investment significantly exceeds previous forecasts and is primarily allocated toward AI infrastructure development. Key components of this plan include:

• Infrastructure Expansion:

  Data Centers: Meta is constructing a massive 2-gigawatt data centre, which would be large enough to cover a significant part of Manhattan. They also plan to bring online approximately 1 gigawatt of computing power by the end of 2025.

  GPUs: The company aims to end the year with over 1.3 million graphics processing units (GPUs), crucial for powering AI workloads.

• AI Development: This investment will support the development and scaling of Meta AI, its AI assistant, aiming to serve more than 1 billion people. It also includes the development of advanced AI models like Llama 4, which is expected to become a leading state-of-the-art model. Additionally, Meta is building an AI engineer to contribute code to its research and development efforts.

Partnerships and Associated Companies:

Meta's substantial investment in AI infrastructure involves collaboration with several key technology partners:

• NVIDIA Corporation ( $NVIDIA(NVDA)$ ): As a leading GPU manufacturer, NVIDIA is poised to benefit from Meta's increased demand for high-performance computing hardware.

• Advanced Micro Devices Inc. ( $Advanced Micro Devices(AMD)$ ): AMD's advanced processors are integral to supporting Meta's AI workloads.

• Arista Networks ( $Arista Networks(ANET)$ ): Specializing in networking equipment, Arista is expected to play a crucial role in enhancing Meta's data centre capabilities.

Following Meta's announcement, stock performances of these partners have shown mixed reactions:

• NVIDIA (NVDA): Experienced a slight decline, with shares decreasing by approximately 0.3%.

• AMD (AMD): Saw a positive uptick, with shares increasing by about 0.55%.

• Arista Networks (ANET): Surged 2.98% in the post-market session. The stock performance remained relatively stable, reflecting investor anticipation of future growth opportunities stemming from the partnership.

Power Supply for Data Centers:

Meta is committed to sustainability and aims to power its data centres with 100% renewable energy. Meta is combining traditional sources like natural gas with innovative renewable solutions:

• Geothermal: Meta has partnered with Sage Geosystems to harness geothermal energy for its data centres. The company also uses Power Purchase Agreements (PPAs) and Renewable Energy Certificates (RECs) to ensure its electricity is sourced from renewable energy.

• Nuclear: Plans to add 1-4 gigawatts of nuclear energy capacity from the early 2030s.

• Solar and Wind: Already at 100% renewable energy matching for operations via PPAs.

• Hydrotreated Vegetable Oil (HVO): Exploring as an eco-friendly alternative for backup generators.

Analysis and Growth Prospects:

Meta's aggressive AI investment signals a focus on becoming a leader in AI technology, which could redefine its market position. The company's strategy might pay off if AI technologies are embraced by consumers and businesses alike, potentially leading to new revenue streams. However, the high cost of infrastructure and the long-term nature of these investments pose risks, particularly if expected AI monetization doesn't materialize as quickly or effectively as planned.

Conclusion:

Meta's Q4 earnings report not only exceeded expectations but also painted a picture of a company heavily betting on AI for future growth. The substantial infrastructure investment, especially in energy sources, underscores a commitment to sustainability alongside technological advancement. While the immediate market response for partners like Nvidia and Broadcom was positive, the long-term success of Meta's strategy will depend on the adoption and monetization of AI, market competition, and technological breakthroughs. This could either cement Meta's position at the forefront of tech innovation or challenge it with unforeseen technological or economic hurdles.

@TigerWire