Sharp Rise in Capital Expenditure Weighed on Meta Platforms' (META) Performance

Sustainable Growth Advisers (SGA), an investment management company, released its fourth-quarter investor letter for its “U.S. Large Cap Growth Strategy.” A copy of the letter can be downloaded here.  In Q4 2025, the Portfolio returned 0.3% (Gross) and 0.2% (Net) compared to 1.1% return for the Russell 1000 Growth Index and 2.7% gain for the S&P 500 Index. Rising volatility, coupled with broadening market leadership, improved the portfolio’s relative performance in the second half of the quarter. In 2025, the Portfolio faced its most challenging years since the firm's inception in 2003. After a challenging year, the firm is encouraged by the robust growth potential in its portfolio and its historically attractive relative valuation. Progressing further, the portfolio is well-positioned to gain from a shift away from high momentum dynamics in U.S. markets and a broadening of market leadership. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, SGA U.S. Large Cap Growth Strategy highlighted Meta Platforms, Inc. (NASDAQ:META) as a notable detractor from performance. Meta Platforms, Inc. (NASDAQ:META) is a technology company that develops products to connect people. On February 9, 2026, Meta Platforms, Inc. (NASDAQ:META) stock closed at $677.22 per share. One-month return of Meta Platforms, Inc. (NASDAQ:META) was 7.31%, and its shares lost 5.92% of their value over the last 52 weeks. Meta Platforms, Inc. (NASDAQ:META) has a market capitalization of $1.713 trillion.

SGA U.S. Large Cap Growth Strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its fourth quarter 2025 investor letter:

"Meta Platforms, Inc. (NASDAQ:META) was a detractor during the quarter, despite delivering strong top-line results, as the company’s robust revenue growth of 26% and accelerating user engagement were overshadowed by a significant increase in capital expenditure and operating expense guidance. While engagement and ad performance continued to improve, the company raised its capex outlook again, with expenses expected to grow over 30%, outpacing revenue revisions and pressuring near-term profitability. Despite these headwinds, Meta’s leadership in social discovery, performance advertising, and its ability to productize AI for consumers position the company well for strong double-digit revenue growth over the next three years. While the company’s long-term positioning in AI remains compelling, we lowered the target weight to an average weight on concerns about heavy increases in AI capital expenditures, later trimming the position back to target."

Meta Platforms, Inc. (NASDAQ:META) is in the third position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 273 hedge fund portfolios held Meta Platforms, Inc. (NASDAQ:META) at the end of the third quarter, which was 260 in the previous quarter. While we acknowledge the potential of Meta Platforms, Inc. (NASDAQ:META) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Meta Platforms, Inc. (NASDAQ:META) and shared a list of stocks Jim Cramer discussed. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.