META Just Increased Capex on Blowout Earnings, So What’s This Talk About a Sell Rating on NVIDIA?
Introduction
Meta (META) reported blowout Q1 2025 earnings that surprised even bullish expectations, posting across-the-board beats in revenue, margins, and net income — yet the same week, a notable firm issued a sell rating on Nvidia. The juxtaposition is worth unpacking, particularly since Meta's updated 2025 CapEx guidance directly reinforces Nvidia’s role as the dominant AI infrastructure supplier.
In my April 25 Substack article, “Investing in AI Infrastructure: How Meta, Microsoft, Google, and Amazon Stack Up,” I detailed Meta’s shift toward owning its own AI infrastructure stack and contrasted it with the closed models and licensing strategies of peers like Microsoft and Google. This quarter’s results reinforce that thesis: Meta continues to internalize AI development while scaling CapEx to levels that rival even hyperscale cloud providers.
This article explains why Meta’s strong results not only validate its AI-first strategy, but also offer investors a lens into how hyperscaler CapEx is scaling AI demand — and why the Nvidia downgrade may prove short-sighted.
Meta’s Q1 Results: AI Execution at Scale
Meta's revenue grew 16% year-over-year to $42.3 billion, nearly $1 billion ahead of consensus. Meanwhile, costs and expenses increased just 9%, showcasing continued operating leverage. As a result, operating income rose 27% to $17.56 billion, lifting operating margin to 41% from 38% a year ago. With a smaller tax provision, net income increased 35% to $16.64 billion. Earnings per share reached $6.43, significantly beating expectations for $5.21.
Zuckerberg called it a “strong start to an important year,” and emphasized momentum in Meta AI and Meta’s ecosystem: “We’re making good progress on AI glasses and Meta AI, which now has almost 1 billion monthly actives.”
These results suggest that AI is not only being deployed — it is already driving meaningful engagement and monetization across Meta’s product suite.
CapEx: From Bold to Bolder
Perhaps most important for infrastructure investors, Meta raised its full-year capital expenditure guidance from $60–65 billion to a new range of $64–72 billion. The language used in the earnings release is revealing: "This updated outlook reflects additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware."
Meta also clarified that "the majority of our capital expenditures in 2025 will continue to be directed to our core business," indicating that AI is not an experimental cost center but now part of Meta’s operational base.
This reinforces a narrative explored in our prior coverage — Meta is not monetizing AI directly via software, like OpenAI or Microsoft, but building infrastructure to embed AI across its entire business. The CapEx ramp confirms the company's move toward long-term AI ownership, not dependence on external vendors.