Meta Platforms Inc. (META) reported robust fourth-quarter financial results for 2025, significantly exceeding analyst expectations, even as the company faces a high-profile lawsuit in New Mexico alleging it allowed minors to access AI chatbots capable of sexual interactions.
The social media giant announced Q4 revenue of $59.89 billion, surpassing Wall Street's estimate of $58.59 billion. Earnings per share came in at $8.88, also ahead of the $8.23 forecast. This strong performance prompted a 4% rise in Meta's stock price in after-hours trading. For the full year 2025, Meta's revenue reached $200.97 billion, marking a 22% increase from 2024's $164.5 billion.
CEO Mark Zuckerberg characterized 2025 as a "strong year" for business performance and expressed his focus on "advancing personal superintelligence for people around the world in 2026." Key operational metrics showed growth, with daily active people across Meta's apps reaching 3.58 billion in December, a 7% year-over-year increase. Ad impressions rose 18% in Q4, while the average price per ad increased by 6%.
However, the company's expenses are rising sharply. Q4 costs hit $35.15 billion, a 40% year-over-year increase, driven significantly by investments in AI infrastructure and higher employee compensation. The operating margin for the quarter contracted to 41% from 48% a year ago. Meta's effective tax rate for 2025 also jumped to 30% from 12%, largely due to the One Big Beautiful Bill Act.
Looking ahead, Meta provided a bullish yet costly forecast for 2026. The company expects full-year expenses to range between $162 billion and $169 billion, with capital expenditures projected to surge to between $115 billion and $135 billion. These investments are primarily directed toward Meta Superintelligence Labs and core platform AI development. Despite the spending, Meta anticipates higher operating income in 2026 than in 2025.
This aggressive AI investment comes alongside significant legal and regulatory headwinds. A lawsuit filed by New Mexico Attorney General Raul Torrez alleges that Meta failed to prevent minors from accessing AI chatbots designed for sexual interactions. Internal documents cited in the lawsuit reveal that employees had raised concerns about AI safety risks involving underage users, including warnings about adults creating AI personas with underage characteristics for romantic purposes.
The lawsuit claims that, despite CEO Mark Zuckerberg's stated support for limiting explicit AI interactions with minors, sufficient safeguards were not implemented. Meta has denied the allegations, calling the portrayal "inaccurate" and stating that the documents were taken out of context. The case highlights potential gaps in Meta's age-verification measures and could result in significant fines or injunctions if the company is found to have violated local statutes.
On the regulatory front, Meta noted it reached an agreement with the European Commission to introduce new "Less Personalized Ads" starting in Q1 2026. However, the company warned that ongoing U.S. court cases, particularly those concerning youth safety, pose material risks. The legal scrutiny is also fueling industry demand for third-party age-verification and AI safety solutions, as noted by groups like the Age Verification and Protection Alliance (AVPA).
Strategically, Meta is pivoting resources toward AI. Earlier in January, the company laid off over 1,000 employees from its Reality Labs division and shut down internal VR studios, signaling a shift away from virtual reality toward AI-powered hardware like the Ray-Ban Meta smart glasses. Tech chief Andrew Bosworth defended the company's continued, albeit slower, commitment to VR.
