Meta reported a sharp pickup in ad sales during the latest quarter, driving its shares higher and reinforcing Wall Street’s belief that its AI-driven targeting tools are improving monetization. According to J.P. Morgan’s Doug Anmuth, the company still has “considerable headroom” for further ad revenue gains as it layers new AI-enhanced ad formats, expands computing capacity and leverages large language models to fine-tune audience segmentation. Analysts at the firm retained an Overweight rating with a December 2026 price forecast of $825, citing investor feedback that the guided post-Q1 deceleration could prove conservative and that growth rates of 25%–30% in 2026 remain achievable.

Meta’s cost trajectory is set to accelerate sharply as it invests heavily in data centers, custom AI chips and next-generation hardware. The company guided 2026 GAAP operating expenses to a range of $162 billion–$169 billion, up 38%–44% year-over-year, alongside capital expenditures of $115 billion–$135 billion, representing a 65%–94% increase. Net property, plant and equipment reached $98 billion at year-end 2025, up 45% from a year earlier, and is projected to climb further as total capex approaches $168 billion in 2027. J.P. Morgan expects free cash flow to narrow to roughly $5 billion in 2026 before a modest rebound to $6 billion in 2027.

Within Meta’s capital outlays, Reality Labs—the division focused on AR/VR and wearables—will account for substantial losses, peaking at around $19.7 billion in 2026. The company plans to allocate approximately 70% of Reality Labs operating expenses to wearables projects (including smart glasses) and 30% to virtual reality and Metaverse development. At the end of 2025, Meta’s non-cancelable contractual commitments surged to $131 billion, up from $33 billion a year earlier, primarily driven by multi-year data-center build agreements and third-party cloud capacity contracts.

Looking ahead, investors will be scrutinizing Meta’s ability to maintain revenue growth beyond the first quarter and to introduce new monetization avenues—such as subscription tiers or commerce integrations—on its core platforms. Equally important will be the pace at which its large-language-model initiatives translate into differentiated ad products and augmented user engagement. With massive spending underway, the path to delivering consistent operating leverage and preserving robust profit margins will determine whether Meta can extend its recent rebound into a sustained uptrend.