Ed Ludlow

Shares of Meta right now on track for their biggest jump since July.

The social media giant has eased some of Wall Street's concerns about its massive AI spending after beating expectations in the holiday quarter.

But it's all in the outlook.

Joining us is Shweta Kajuri, a managing director of Global Internet.

at Wolf Research, an outperformed rating on the stock, price target $850.

$135 billion of capital expenditures at the top end, but also enough growth in the core business aided by AI to justify it.

Is it as simple as that?

I think so.

Well, first of all, thanks for having me.

I think the key question getting into the print was, well, Meta is one of those companies that is spending a lot of money not only on AI headcount, but also on CapEx, and they have yet to show something for it.

Well, this is a quarter where they're showing it, where the first quarter guide of over 30% year over year on a reported basis is the highest we have seen since

the third quarter of 2021 in over four years.

And so and at that time, Meta's business was about half the size as it is now.

So this is best in class, remarkable growth rate.

So the point is, if it can accelerate to this level, even if the growth decelerates going forward modestly, they have enough monetization levers that seem durable.

because they're making so many changes to their own models that are driving impressions growth and ROI for advertisers in addition to potentially new monetization beyond advertising revenue that will come on because of their AI models over near to midterm.

And that is giving comfort on, okay, well, maybe they are spending to sustain a pretty healthy level of top line growth.

Meta is not a hyperscaler, but something interesting Caroline brought up with our last guest, Gabriella from Goldman, is Microsoft tried to talk up all the benefits it's feeling internally from allocating compute and investing.

Susan Lee talks about exactly the same thing.

Engineering output internally is up 30%.