Meta's Earnings Exceed Expectations, Investing $65 Billion in AI to Counter DeepSeek Challenge

Meta released its financial report for the fourth quarter of 2024, with core financial metrics exceeding expectations across the board. The company reported revenue of $48.385 billion, a 21% year-over-year increase, surpassing market expectations of $46.949 billion. Diluted earnings per share (EPS) reached $8.02, up 50.5% year-over-year, significantly exceeding analysts' expectations of $6.75. Operating profit stood at $23.365 billion (+43%), while net profit reached $20.838 billion (+49%).

Advertising remains the main revenue driver, with Q4 ad revenue at $46.78 billion (+21%). Revenue from Meta’s family of apps (including Facebook, Instagram, etc.) reached $47.3 billion (+21%), exceeding expectations. Reality Labs, the division responsible for metaverse-related businesses, reported revenue of $1.08 billion, with growth slowing to just 1%, while its operating loss widened to $4.97 billion.

Recently, Meta responded to discussions on the return on investment triggered by DeepSeek’s technological breakthroughs. The U.S. industry has recognized DeepSeek’s achievements, and Wall Street analysts believe this signals challenges for Meta in the AI race.

In response, Meta has significantly increased its capital expenditures, reaching $14.84 billion in Q4 (+87.8%) and $39.23 billion for the full year. The company plans to raise this further to $60-65 billion in 2025, underscoring its long-term investment in AI and infrastructure. Meta forecasts Q1 2025 revenue of $39.5-41.8 billion, slightly below market expectations, and projects full-year operating expenses of $114-119 billion, exceeding the market’s forecast of $108.01 billion.

On the technological front, Meta is accelerating updates and iterations of its Llama model. During the company’s Q4 earnings call, Mark Zuckerberg stated that the latest version of Llama is making "tremendous progress" and reaffirmed Meta’s commitment to open-source strategy to expand its influence in the AI ecosystem. While DeepSeek’s high-performance open-source models pose competitive pressure, Zuckerberg remains confident that the market is large enough to support multiple AI applications coexisting and thriving.

Zuckerberg believes that users want AI to be personalized based on their interests, cultural backgrounds, and worldviews rather than relying on a single general model. He predicts that 2024 will be a pivotal year for the AI industry, with Meta’s AI assistant playing a leading role in the field. Additionally, he mentioned that AI agents with the capabilities of mid-level engineers—able to code and solve problems—could become a reality this year, potentially marking "one of the most significant innovations in history."