Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB)’ plan to boost its capital expenditures (capex) to bolster its AI capabilities has been welcomed as a positive move for the Facebook, Instagram and WhatsApp owner by Jefferies analysts ahead of its fourth quarter earnings report due after today's closing bell.
Wall Street analysts, on average, expect Meta to report earnings per share of $6.74 and revenue of $46.99 billion.
Ahead of its Q4 report, CEO Mark Zuckerberg outlined the company’s plans to invest between $60 billion and $65 billion in capex in 2025, up from the estimated $38 billion to $40 billion for 2024.
The company plans to build a new $10 billion data center in Louisiana which is expected to provide 1 gigawatt of computing power and to increase its fleet of graphics processing units (GPUs) to 1.3 million by the end of 2025 compared to 350,000 in 2024.
Analysts at Jefferies see strong long-term returns for Meta on these investments.
“We are bullish on Meta's position to monetize its traction in Gen AI with META.AI & Llama,” they wrote in a note to clients.
Jefferies raised its capex forecast for fiscal 2025 by $8.1 billion and for 2026 by $9.1 billion.
“Capex of $60 to $65 billion aligns with buyside expectations, implying 60% year-over-year growth but is above street estimates at $52 billion,” they wrote.
“We stay at the lower end of capex guide, noting that, while Meta revised up initial capex and total expense guides in 2024, it has a past cadence of coming below the low end of initial guidance in three of the last five years for capex and four of the last six years for total expenses.”
They expect this to mark the bottom of 2025 free cash flow pressure, lowering their projects by $8.8 billion for 2025 and $10 billion for 2026.
The analysts repeated their ‘Buy’ rating and $715 price target on Meta. Shares of Meta traded hands at about $672 on Wednesday morning.
“Overall, we continue to be encouraged by Meta's ability to sustain double-digit revenue growth, given the combination of higher engagement from AI investments, increased advertiser efficiency and ramping of incremental monetization formats (e.g. WhatsApp & Llama),” they wrote.
“Ultimately, we see still see a pathway to $26 plus in 2025 EPS making a $30 2026 EPS story seem possible.”
- Updated with share price movement -