Meta's AI vision doesn't come cheap, and its earnings could prove it

Meta ( META ) has enjoyed a wave of favorable headlines with its new products over the past month, but bullish Wall Street may be reminded of one thing when the company reports earnings on Wednesday.

Bringing CEO Mark Zuckerberg's AI vision to life doesn't come cheap.

"Our overall take is that Meta will qualitatively guide to capex and total expense levels that are above the Street, and hence we believe it is probable that Meta's Street [earnings] estimates for 2027 come down," Evercore ISI analyst Mark Mahaney warned. "Our uneducated guess is that management will guide for total expense growth in 2027 at a somewhat slower percentage growth rate than in 2026," or about 40% year over year, and capital expenditures dollar growth "similar to 2026," or around $70 billon.

How the Street would interpret an even more aggressive spending tone by Meta is murky. For one, the stock has rallied a solid 6% in the past month amid a barrage of new product drops .

Meta officially launched its newest frontier AI systems, Muse Wonder and Muse Wonder Full , in the past week. The models are engineered specifically for multistep reasoning, coding, and autonomous personal agent workflows.

They are the first new models from Meta's new Superintelligence Labs. So far, they are receiving high praise for their speeds compared to the likes of OpenAI's ( OPAI.PVT ) GPT-6 and Anthropic's ( ANTH.PVT ) Claude Opus 5.5, spurring optimism about Meta's ability to compete for big enterprise business in the AI boom.

Meanwhile, the Muse AI agent — released in September — appears to be off to a strong adoption start .

The argument could be made that the Street is overlooking Meta's cost of building out AI, given that the stock has rallied steadily. On the other hand, the Street could embrace higher spending to support the growth of praised products.

All in, it's a confusing setup on the stock heading into the earnings report.

"We continue to view Meta as a core name to own as the AI Revolution moves from models to agents, because a frontier model paired with 3.6 billion daily users is a combination few competitors can match," Yorkville Ives partner Dan Ives said.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.