Meta Is Living Proof How AI Adoption Can Benefit the Enterprise
As short-covering pops the shares, here's what we may have to do next.
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Shares of Meta Platforms (META) are zooming higher Thursday, a welcome relief, even though its position size in the Pro Portfolio has jumped to 4.5%. Meta more than delivered for its December quarter and guided current quarter revenue to $53.5 billion-$56.5 billion, head and shoulders above the $51.37 billion consensus.
What drove the December-quarter revenue beat and upside guidance for the current quarter can be traced back to the company delivering more ads across its Family of Apps and getting paid more to do so. Ad impressions delivered across its Family of Apps rose 18% in the December quarter, a quicker pace than the 12% gain for 2025, which we attribute to monetization efforts extending to Threads and WhatsApp.
Video on Instagram and Facebook continued to drive higher engagement rates. Average ad prices continued to trend higher, climbing 6%, year over year, in the December quarter, and Meta sees more gains ahead as it continues to leverage AI “across all layers of the marketing and customer engagement funnel.” That cries out better prices but also better margins as the company serves up more ads to its almost 3.6 billion daily active people.
DAP Stands Out
One item that stood out to us is the slow growth in Meta’s number of family daily active people (DAP). That figure, near 3.6 billion, was up almost 7% year over year, but a more modest 1% compared to the September quarter. The days of growing the user base by leaps and bounds are over, which explains why Meta is focused on serving more ads and using AI to do so. That focus led the family average revenue per person (ARPP) to jump 14.5% to $16.56 in the December quarter compared to $14.46 in the September quarter. Given seasonality factors in the December quarter, the year-over-year jump from $14.25 is even more impressive when we account for the 2024 presidential election.
Looking Ahead
While Meta did not share revenue guidance for the full year, trends in the ARPP and even modest gains in DAP should translate into meaningful revenue growth in the coming quarters. 2026 will also be a full year of greater monetization on Threads and WhatsApp, and we have to wonder how long until Meta implements video on Threads, a move that, based on what we’re seeing with Instagram and Facebook, should drive even greater engagement and monetization.
What we discussed above is overshadowing the step up in costs and operating expenses, as well as capex levels for 2026. For the coming year, Meta telegraphed that total cost, and expenses will rise to $162 billion-$169 billion vs. just under $118 billion in 2025, while capex will climb to $115 billion-$135 billion, up from $72.2 billion in 2025. No matter how you slice it, those are some big increases and ones that will restrict margin expansion in the coming quarters. But as you can guess, that ramp in capex levels bodes very well for our chip holdings as well as Arista Networks (ANET) , which counts Meta as a key customer.
Why Meta Is 'Working,' But Others Aren't
So why are Meta shares “working” today, when others such as Microsoft (MSFT) and ServiceNow (NOW) are not? What’s different in those reports and comments, keeping in mind Meta’s spending plans for this year?
If we had to put our finger on it, it would be that Meta is not only showing clear results of leveraging AI in its business, but it is also demonstrating how that effort is driving average revenue per person and operating cash flow higher. In other words, its reaping the benefits of investments to date. Some might call it the poster child for what AI can do in the enterprise, and while that's hard to refute, we would counter and say that impact is the mirror reason why HD Hyundai recently expanded its relationship with Palantir (PLTR) .
Connecting this back to ServiceNow and even Microsoft, the greater the number of companies that report similar benefits, the quicker we’ll see the cloud (no pun intended) over MSFT and NOW shares lift. We’ll also throw Palantir and Axon (AXON) shares into that basket as well.
Because we are still in the relatively early days of enterprise AI adoption, the real wave for those supportive comments may not show up until the March-quarter earnings season. That's another reason to remain patient and not make any rash actions when NOW shares are deeply oversold (RSI at 23.62) and MSFT shares are on the cusp of being oversold.
Let's remember too that it wasn't long ago that folks were down on META shares, and in relatively short order they went from being almost oversold to being overbought.
Our Meta Game Plan
Getting back to META, we will maintain our $850 price target, but with those shares now in overbought territory following Thursday’s approximate 10% move higher, our message to folks is not to chase them even though we have ample upside to maintain our One rating. Per Nasdaq, there were 32.5 million shares short as of January 15, which would take around 2.4 days to cover. Let’s let that activity happen and see where the stock settles out.
Should we see META shares trend even higher in the near-term, despite our One rating, we will have to bow to our portfolio discipline should they move past a 4.5% position size. But we will remain sizable owners of META shares as upcoming investments aim to spin the advertising flywheel faster while the increasingly AI-laced ad business drives interaction and monetization higher.
At the time of publication, TheStreet Pro Portfolio was long META, MSFT, NOW, ANET, PLTR and AXON.
