META: Expanding AI Infrastructure Investment Will Drive Long-Term Upside Despite Higher Costs

Analysts have slightly lowered their average price target for Meta Platforms, citing the company's higher capital expenditure plans for artificial intelligence in contrast to strong advertising growth and expanding profit margins. Updated targets now cluster in the $810 to $875 range.

Analyst Commentary

Recent research reveals a divided view on Meta Platforms, as analysts weigh the company's robust execution in advertising and artificial intelligence against the risks posed by rising capital expenditures and longer-term uncertainties.

• Bullish analysts emphasize Meta's ongoing advertising strength, highlighted by year-over-year revenue growth driven by improved algorithms and greater user engagement.
• Several have raised or reiterated high price targets, citing strong ad share gains and advancements in AI-powered recommendations. These factors are expected to continue fueling top-line growth.
• The company’s strategy to invest heavily in AI, including product enhancements and expanding its AI lab, is seen as positioning Meta for further monetization opportunities across its vast user base.
• Some see current share prices as not yet fully reflecting Meta’s artificial intelligence initiatives and their potential to drive future earnings.

• Bearish analysts caution that Meta’s outlook for significantly higher capital and operating expenditures in 2026 and beyond may compress margins and limit near-term upside for shareholders.
• There are concerns over comparability to previous high-spending cycles, especially the Metaverse push. In that period, heavy investment outpaced tangible returns.
• Some believe the return profile is uncertain. Ongoing investment may delay improvements in earnings visibility, leading to a more cautious stance on current valuations.
• A few highlight competitive risks, particularly from cloud providers and alternative AI hardware suppliers. These competitors could challenge Meta’s advantage and add to execution risk for new AI initiatives.

What's in the News

• Meta has ended its internal research into social media's impact on mental health after finding evidence of harm to users on Facebook and Instagram. (Reuters)
• Meta Platforms is collaborating with Blue Owl Capital to develop the $27 billion Hyperion data center campus, with the goal of increasing speed and flexibility for AI infrastructure. (WSJ)
• The company continues significant investment in AI and has broken ground on a new AI-focused data center in El Paso, Texas, which is designed to scale for next-generation AI workloads. (Meta Platforms, Inc.)
• U.S. senators have urged the FTC and SEC to investigate Meta for alleged revenue generated from scam and banned goods advertisements on Facebook and Instagram. (Reuters)
• Meta was ordered by a Spanish court to pay €479M to local media outlets for unfair competition and violating EU data protection laws, a ruling the company plans to appeal. (Reuters)

Valuation Changes

• Fair Value: Remains unchanged at $841.42 per share, reflecting stability in consensus estimates despite shifting expenses and outlook.
• Discount Rate: Marginally reduced from 8.32% to 8.32%, signaling a slightly lower perceived risk in Meta's future cash flows.
• Revenue Growth: Decreased slightly from 16.51% to 16.45%, indicating a modestly more conservative growth forecast.
• Net Profit Margin: Improved to 30.23% from 29.87%, suggesting analysts expect stronger profitability in the future.
• Future P/E Ratio: Decreased from 29.97x to 29.33x, indicating marginally less optimistic expectations on future earnings multiples.