The AI spend goes on for Meta as CapEx estimates soar for 2026

I don’t have many good things to say about  Mark Zuckerberg, but I must give the Meta CEO credit for his steadfast refusal to buckle to Wall Street short termism when it comes to essential AI infrastructure spend.

The firm is now looking at annual capital expenditure of between $115 billion and $135 billion, compared with $72.22 billion a year earlier. The majority of expense growth will be driven by infrastructure costs, including third-party cloud spend and higher infrastructure operating expenses.

CFO Susan Li explained the steep rise:

We have significant opportunities to improve our core business in 2026. We plan to continue to prioritize investing in the business to support these opportunities while also positioning us for an entirely new and exciting product cycle over the coming years, powered by our AI models.

Procuring sufficient infrastructure capacity is central to these initiatives, and we're working to meet our silicon needs by deploying a variety of chips that optimally support each of our different workloads. To that end, in Q4, we extended our Andromeda ads retrievable engine, so it can now run on NVIDIA, AMD and MTIA. This, along with model innovations, enabled us to nearly triple Andromeda's compute efficiency. In Q1, we will extend our MTIA program to support our core ranking and recommendation training workloads in addition to the inference workloads it currently runs.

More broadly, as we invest in infrastructure to meet our business needs, we continue to prioritize maintaining long-term flexibility so we can adapt to how the market develops. We're doing so in several ways, including changing how we develop data center sites, establishing strategic partnerships, contracting cloud capacity and establishing new ownership structures for some of our large data center sites. We have a strong net cash balance and expect our business will continue to generate sufficient cash to fund our infrastructure investments in 2026, which is reflected in our expectations. Nonetheless, we will continue to look for opportunities to periodically supplement our strong operating cash flow with prudent amounts of cost-efficient external financing, which may lead us to eventually maintain a positive net debt balance.

There’s another reason for increased costs, added Zuckerberg:

I think that 2026 is going to be the year that AI starts to dramatically change the way that we work. As we navigate this, our North Star is building the best place for individuals to make a massive impact. So to do this, we're investing in AI native tooling so individuals at Meta can get more done, we're elevating individual contributors and flattening teams. 

We're starting to see projects that used to require big teams now be accomplished by a single, very talented person. I want to make sure that as many of these very talented people, as possible, choose Meta as the place that they can make the greatest impact to deliver personalized products to billions of people around the world. And if we do this, then I think that we're going to get a lot more done. And I think it's going to be a lot more fun.

Reality

That said, fiscal bloody mindedness still runs strongly through the firm. While Zuckerberg does appear to have backed away from his personal ‘White Whale’ Metaverse obsession, the Reality Labs division is still pouring money down the drain, losing over $6 billion in Q4  and  a staggering $19.19 billion for the full year. And there’s more to come as Meta’s 2026 forecast envisages “Reality Labs operating losses remaining similar to 2025 levels”.

Zuckerberg makes no apologies for this:

Today, our apps feel like algorithms that recommend content. Soon, you'll open our apps, and you'll have an AI that understands you and also happens to be able to show you great content or even generate great personalized content for you.

Glasses are the ultimate incarnation of this vision. They're going to be able to see what you see, hear what you hear, talk to you and help you as you go about your day and even show you information or generate custom UI right there in your vision. Sales of our glasses more than tripled last year, and we think that they're some of the fastest-growing consumer electronics and history. Billions of people wear glasses or contacts for vision correction and I think that we're in a moment similar to when smartphones arrived, and it was clearly only a matter of time until all those flip phones became smartphones. It's hard to imagine a world in several years where most glasses that people wear aren't AI glasses.

For Reality Labs, we are directing most of our investment towards glasses and wearables going forward while focusing on making Horizon a massive success on mobile and making VR a profitable ecosystem over the coming years. I expect Reality Labs losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward while continuing to execute on our vision.

The numbers came as part of Meta’s release of its latest fiscal numbers. For Q4, total revenue was $59.89 billion, up 24% year-on-year, with net income of $22,768 billion, up nine percent. For the full year, revenue was $200.966 billion, up 22% year-on-year, with net income down three percent to $60,458 billion.

My take

Spend, spend, spend - and quite right too in the main.