Meta Plans $115–135B Capex, Leases Google TPUs to Strengthen AI
Meta reported 22% y/y ad revenue growth to $196.8 billion in 2025 and plans $115–135 billion in 2026 capital spending plus $162–169 billion in operating expenses, squeezing near-term free cash flow. It also negotiated a multi-billion-dollar lease of Google TPUs alongside existing Nvidia GPU and AMD deals to build flexible AI infrastructure.
1. Ad Revenue Surge and User Growth
Meta’s ad revenues rose 22% year-over-year to $196.8 billion in 2025, driven by a 12% increase in ad impressions and 9% rise in average ad prices. The platform’s 3.58 billion daily users underpin its data-centric AI engagement initiatives.
2. Diversified AI Infrastructure Strategy
Meta struck a multi-billion-dollar lease with Alphabet for its AI TPUs, adding to existing GPU partnerships with Nvidia and AMD. This multi-supplier approach is designed to optimize compute sourcing, improve model training capacity and reduce dependency on a single chip vendor.
3. Capital Deployment and Financial Outlook
The company earmarked $115–135 billion in capital expenditure and $162–169 billion in operating expenses for 2026 to accelerate AI R&D and platform enhancements. This aggressive spending plan supports long-term growth but is expected to compress near-term free cash flow.
4. Competitive Landscape and Valuation
While Meta leverages AI to boost engagement across its social platforms, it faces competition from Alphabet’s diversified ad and cloud businesses. Meta’s forward price/sales multiple of 6.53X versus Alphabet’s 8.85X reflects its concentrated ad revenue model and heavy investment cycle.