Meta’s shares surged up to 10% in after-hours trading following the company’s fourth-quarter earnings report, driven by stronger-than-expected revenue guidance. Meta reported a 24% year-over-year increase in fourth-quarter sales, with advertising revenue reaching $58.1 billion—accounting for nearly 97% of total revenue. The company’s daily active users totaled 3.58 billion, meeting analyst expectations. Meta raised its outlook for the first quarter of 2026, forecasting revenue between $53.5 billion and $56.5 billion, surpassing the $51.41 billion analysts had expected. Finance chief Susan Li attributed the optimistic forecast to strong demand through the end of 2025 and into early 2026. Capital expenditures for 2026 are projected to range from $115 billion to $135 billion—well above the $110.7 billion analysts anticipated and nearly double the $72.2 billion spent in 2025. The increase is largely due to Meta’s aggressive investments in its Meta Superintelligence Labs and core business infrastructure. CEO Mark Zuckerberg confirmed that Meta will release new AI models over the coming months, saying the initial models will be strong and demonstrate a rapid pace of progress. He emphasized that the company plans to steadily advance its AI capabilities throughout the year. This follows Meta’s major 2025 overhaul of its AI unit, including a $14.3 billion investment in Scale AI to bring in co-founder Alexandr Wang and key team members. Wang now leads Meta’s TBD unit, created after the lukewarm reception to the Llama 4 model. The company is reportedly testing a new frontier model and Llama successor codenamed Avocado, with a planned release in the first half of 2026. Meanwhile, Meta’s Reality Labs unit posted an operating loss of $6.02 billion on $955 million in sales for the quarter—slightly worse than the $5.67 billion loss and $940.8 million in sales analysts had forecast. Since late 2020, Reality Labs has accumulated nearly $80 billion in operating losses. Earlier this month, Meta laid off over 1,000 employees from its VR-focused teams, shifting resources toward AI and wearable devices like the Ray-Ban Meta smart glasses. While tech chief Andrew Bosworth said Meta remains committed to VR, the company’s reduced focus has raised concerns about a potential “VR winter” among developers. Zuckerberg stated that 2026 is expected to be the peak year for Reality Labs’ losses, with a gradual reduction in losses anticipated moving forward. Meta also warned of ongoing regulatory and legal risks, particularly in the U.S. and European Union. High-profile social media trials set to begin this year could lead to material financial impacts, the company said.