Meta Surpasses Q4 Revenue Expectations, Issues Cautious Q1 Outlook and Plans $65B in AI Investments for 2025

Local Market Commentary

South African equities advanced on Wednesday, with the Top 40 index rising 1.1% to close at 77,184.3 points, while the All Share index gained 1.0%, settling at 85,314.7 points. Market participants are focused on the South African Reserve Bank’s upcoming interest rate decision on Thursday, with consensus expectations pointing to a 25 basis point reduction to 7.50%. Despite a stabilized electricity supply, Eskom’s financial sustainability remains a concern, according to the Auditor-General. The state-owned utility has not implemented load shedding for ten months and is expanding its renewable energy capacity, yet structural inefficiencies persist. Key challenges include cost reductions and improving municipal debt collection. For the 2024 financial year, Eskom met less than 43% of its performance targets, achieving under 50% of its R22.4 billion ($1.2 billion) savings goal.

European Market Commentary

European equities reached record highs on Wednesday, with the STOXX 600 gaining 0.5%, marking its largest single-day rise in over a week. Technology stocks led the rally, climbing 2.5%, the strongest sector performance in three weeks. Investors are closely monitoring the European Central Bank (ECB), which is widely expected to lower rates by 25 basis points later today. Meanwhile, Germany's federal and state tax revenue increased 3.8% year-on-year in 2024, despite an economic contraction, totalling €861.1 billion ($897.4 billion)—exceeding the projected 3.1% rise to €855.2 billion, according to the finance ministry.

U.S. Market Commentary

U.S. equity markets retreated on Wednesday, with the Nasdaq falling over 1% following the Federal Reserve’s decision to hold interest rates steady. The central bank provided limited forward guidance on further rate cuts, following three reductions totalling 100 basis points in 2024. Technology stocks faced headwinds, as Nvidia declined 6% and Microsoft lost 1.1%, driven by concerns over growing competition from China’s DeepSeek, which has introduced AI models optimized for less advanced chipsets. Market expectations for rate cuts have moderated, with traders now pricing in 44 basis points of easing by year-end, down from 48 basis points before the Fed announcement. Investors will closely scrutinize Friday’s release of the Personal Consumption Expenditures (PCE) Price Index, a key inflation measure shaping Fed policy expectations.

Asia Market Commentary

Asian markets exhibited mixed performance this morning, with Japan and Australia advancing, while several Asia-Pacific exchanges remained closed for the Lunar New Year holiday. In Australia, export prices rose 3.6% in Q4 2024, though they declined 8.6% year-on-year, while import prices increased marginally by 0.2% for the quarter, but fell 1.9% over the year, according to the Australian Bureau of Statistics. Meanwhile, the Hong Kong Monetary Authority maintained its base rate at 4.75%, mirroring the Federal Reserve’s policy stance.

Commodity Market Commentary

Gold prices declined on Wednesday as U.S. Treasury yields and the dollar strengthened following the Federal Reserve’s rate decision. The lack of clear guidance on monetary easing dampened demand for non-yielding assets. Crude oil prices remained range-bound, with market participants assessing the impact of potential U.S. tariffs on Mexican and Canadian crude imports. Meanwhile, U.S. crude inventories expanded by 3.46 million barrels last week, aligning with the forecasted 3.19 million-barrel increase, as winter storms disrupted refining operations. Market focus now shifts to the upcoming OPEC+ ministerial meeting on February 3, where producers will evaluate the impact of U.S. crude supply expansion and consider a coordinated response, according to Kazakhstan’s energy ministry.

Currency Market Commentary

The South African rand traded in a narrow range on Wednesday as markets awaited the U.S. Federal Reserve’s interest rate decision. In broader FX markets, traders positioned for dollar strength against the euro in anticipation of a potential dovish shift by the ECB. Meanwhile, the Japanese yen posted gains, as expectations solidify that Japan may sustain rate hikes, diverging from the global monetary easing cycle.

Hyprop Investments Limited (HYP) +0.85%

Hyprop Investments Limited, a specialist retail property fund, continues to deliver strong performance through its strategic focus on high-quality, dominant retail centres in key economic nodes across South Africa and Eastern Europe. The portfolio benefits from resilient tenant demand, ensuring sustainable long-term returns for stakeholders. For the six months ended 31 December 2024, both regions demonstrated robust growth. In South Africa, key trading metrics—including tenants’ turnover, trading density, and foot count—showed positive momentum, with trading density increasing by approximately 6% in November and December 2024. This reflects the continued competitiveness and relevance of Hyprop’s nine retail centres. Similarly, the Eastern European portfolio experienced strong growth in tenant turnover and trading density, reinforcing its market dominance despite regulatory constraints such as Croatia’s non-working Sundays Trade Act. Notably, turnover in Eastern Europe increased by 8.8% for the period, underscoring the resilience of the assets. Hyprop remains committed to optimizing capital allocation, enhancing yield, and driving long-term value creation. The interim results for this period will be released on 13 March 2025.

Hammerson plc (HMN) -2.28%

Hammerson plc will announce its full-year results for the year ended 31 December 2024 on Wednesday, 26 February 2025. The results presentation for analysts will take place at the company’s London office, Marble Arch House, 66 Seymour Street, W1H 5BX. Full details, including joining instructions for the briefing, will be available on Hammerson’s investor website in due course. The company-compiled consensus for FY 2024 projects adjusted earnings of £96.1 million (range: £92.9 million – £100.7 million) and adjusted EPS of 19.5p (range: 18.6p – 20.7p).

Microsoft Corporation (MSFT) -1.09%

Microsoft's earnings report revealed concerns over slowing cloud growth and rising capital expenditures, leading to a 4.5% drop in after-hours trading. Azure's revenue grew 31%, slightly missing estimates, while capital expenditures surged to $22.6 billion, surpassing forecasts. Competitive pressure from China’s DeepSeek AI models raised fears of price cuts. However, commercial bookings surged 67%, and Microsoft retained key OpenAI hosting rights. Intelligent Cloud revenue slightly missed expectations at $25.54 billion, but total revenue rose 12% to $69.6 billion, beating estimates. EPS of $3.23 also exceeded projection

Meta Platforms Inc. (META) +0.32%

Meta reported strong Q4 revenue of $48.4 billion, surpassing expectations, but issued a cautious Q1 forecast of $39.5B–$41.8B, near analysts' $41.72B estimate. The company plans $65 billion in AI-related capital expenditures in 2025, with total expenses projected to rise to $114B–$119B from $95B in 2024. Daily active users grew 5% to 3.35 billion, while its Reality Labs unit posted a $5 billion loss despite beating sales estimates. CEO Mark Zuckerberg remains bullish on AI but expects major monetization beyond 2025.

International Business Machines Corporation (IBM) +1.32%

IBM beat fourth-quarter profit estimates, driven by strong demand in its software unit as businesses increased IT spending, particularly on cloud infrastructure and AI adoption. The software segment saw its biggest revenue jump in five years, while consulting revenue fell 2% to $5.2 billion. Total revenue remained flat at $17.55 billion, aligning with expectations. IBM posted adjusted earnings per share of $3.92, surpassing the $3.75 forecast. The company also projected at least 5% revenue growth for 2025, exceeding the 3% growth seen in 2024. Shares surged 10% in extended trading

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