Meta Platforms Thrives Amid AI Revolution, Attracting Investor Attention

A new quarterly earnings season is here, with a spotlight on corporate America’s leading companies. In the coming weeks, numerous firms will reveal their financial results, drawing particular interest from investors in the tech sector, which is rapidly advancing in artificial intelligence (AI).

Meta Platforms (NASDAQ: META), the parent company behind popular social networks like Facebook, Instagram, and WhatsApp, serves over 3.3 billion users daily. Recently, it has also emerged as a key player in AI by developing some of the most widely used open-source large language models (LLMs).

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Last week, Meta shared its fourth-quarter results, showcasing record revenue and earnings alongside notable advancements in its AI initiatives. The company’s stock has risen by 47% over the past year, yet it still presents an attractive buying opportunity, suggesting that investors might regret not purchasing it today when reflecting on future growth.

Image source: Getty Images.

Meta AI Emerges as a Leading AI Chatbot

The evolution of social media is evident as platforms like Facebook shift from being primarily about personal connections to featuring content from creators that users may not even follow. This transformation is driven by AI algorithms, which tailor user experiences by analyzing content preferences.

To enhance user engagement, Meta introduced its AI assistant, Meta AI. Accessible across its key social media platforms, this AI can answer complex queries, generate images, and even propose activities for group chats. As a result, it competes with traditional search engines like Alphabet‘s Google, potentially attracting significant new traffic.

As of the end of 2024, Meta AI boasted 700 million monthly active users—a 50% increase from the previous quarter—making it one of the busiest chatbots globally.

Built on Meta’s Llama family of LLMs, Meta AI shares similarities with OpenAI’s ChatGPT, yet its open-source nature allows for quicker problem-solving by harnessing the developer community’s input. The Llama models have been downloaded over 600 million times, streamlining troubleshooting significantly.

This collaborative approach enabled Meta to rapidly close the gap with established players like OpenAI, which began AI development in 2015, while Meta only launched its efforts in 2022. CEO Mark Zuckerberg anticipates that Llama 4 could become the industry’s most advanced model upon its release this year.

A Potential Revenue Surge from AI

Most of Meta’s revenue stems from advertising on Facebook and Instagram. Keeping users engaged is crucial, as more time spent online translates to increased ad exposure and revenue. The company’s AI-driven algorithms fuel user engagement and are expected to sharpen their effectiveness in maintaining user interest.

During the fourth quarter, Meta achieved record earnings of $48.3 billion, marking a 20.6% rise from the previous year. Additionally, Meta’s total revenue for 2024 reached an all-time high of $164.5 billion, representing a 22% increase compared to 2023.

Beyond user engagement, innovations like Meta AI may unlock new revenue pathways. The company could consider offering a subscription-based version of the chatbot akin to OpenAI’s ChatGPT. This model could also attract advertising dollars, where businesses could opt to include product links in Meta AI’s responses—similar to Google’s advertising strategy with its AI Overviews in search results.

Zuckerberg has hinted at developing customizable AI agents for businesses that could seamlessly manage customer queries via WhatsApp and Messenger. This service could mirror having a skilled customer service representative available around the clock, something many businesses would find valuable.

However, Meta has stated that monetization will not be prioritized until 2025, aiming to scale Meta AI to billions of users before pursuing revenue. Historically, Meta has successfully adopted this strategy, particularly evident in the popularity of features like Stories and Reels.

Meta Stock: A Smart Investment Opportunity

In 2024, Meta achieved an impressive earnings per share (EPS) of $23.86, resulting in a price-to-earnings (P/E) ratio of 28.8. This figure presents a favorable comparison to the Nasdaq-100 index, which carries a P/E ratio of 33.4 and positions Meta as the second least expensive among the eight tech giants in the $1 trillion club:

PE Ratio data by YCharts

Notably, Meta’s EPS performance is impressive considering the company allocated $39.2 billion to capital expenditures in 2024, largely earmarked for expanding data center infrastructure and AI hardware. With plans to invest an additional $65 billion in 2025, analysts remain optimistic about the potential for continued EPS growth, suggesting that Meta’s stock may look even better from a valuation standpoint going forward.

Cathie Wood, founder of Ark Investment Management, predicts that AI software companies could generate $8 in revenue for every $1 spent on hardware. If this holds true, Meta could see significant returns on its current investments.

With its operational strength and the prospective monetization of AI features like Meta AI, the company seems poised for a new growth phase. Investors reflecting on this period in future years may find themselves wishing they had acted on the stock at its current levels.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and advises on options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the author’s and do not necessarily reflect those of Nasdaq, Inc.