Meta Increases AI Investment, Profitability Under Pressure
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2d ago
0mins
Should l Buy META?
Source: Fool
- AI Budget Surge: Meta plans to increase its capital expenditures to $135 billion in 2026, an 87% rise from last year, aimed at supporting its AI Superintelligence team, which is expected to drive future technological innovation and market competitiveness.
- Profitability Pressure: As capital expenditures rise, Meta's depreciation expenses increased by 20% in 2025 and are expected to rise further in 2026, leading to a decline in operating margin from 48% in Q4 2024 to 41%, although management still anticipates overall operating income growth.
- AI-Driven Revenue Growth: Meta achieved a 24% revenue growth in Q4, driven by increased user engagement and stable ad price hikes, demonstrating its effectiveness in AI applications and market potential.
- Generative AI Potential: Meta is planning to leverage generative AI to attract more advertisers, combining personalized content and shopping agent features, which is expected to generate substantial ad revenue and further solidify its market position.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for META is 824.71 USD with a low forecast of 655.15 USD and a high forecast of 1117 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 670.210
Low
655.15
Averages
824.71
High
1117
Current: 670.210
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Meta Increases AI Investment, Profitability Under Pressure
- AI Budget Surge: Meta plans to increase its capital expenditures to $135 billion in 2026, an 87% rise from last year, aimed at supporting its AI Superintelligence team, which is expected to drive future technological innovation and market competitiveness.
- Profitability Pressure: As capital expenditures rise, Meta's depreciation expenses increased by 20% in 2025 and are expected to rise further in 2026, leading to a decline in operating margin from 48% in Q4 2024 to 41%, although management still anticipates overall operating income growth.
- AI-Driven Revenue Growth: Meta achieved a 24% revenue growth in Q4, driven by increased user engagement and stable ad price hikes, demonstrating its effectiveness in AI applications and market potential.
- Generative AI Potential: Meta is planning to leverage generative AI to attract more advertisers, combining personalized content and shopping agent features, which is expected to generate substantial ad revenue and further solidify its market position.
See More
Meta Tests Standalone Platform 'Vibes'
- Standalone App Testing: Meta is testing the standalone 'Vibes' platform, which allows users to create and share only AI-generated videos, aiming to enhance user experience and attract more content creators.
- User Growth Trend: Since its launch within the Meta AI app in September last year, 'Vibes' has gained strong early user engagement, with Meta noting that users are increasingly leaning into this format for creation and sharing.
- Immersive Experience: The new app provides a focused and immersive environment designed to enhance the experience of creating and discovering AI-generated videos, thereby driving user engagement and community interaction.
- Future Expansion Plans: Meta indicated plans to further expand the app based on community feedback, demonstrating the company's commitment to user needs and strategic positioning for future growth.
See More
Market Divergence: Tech Stocks Under Pressure
- Market Performance Divergence: Last week, the Dow Jones Industrial Average surged 2.50% to a new all-time high, while the Nasdaq fell 1.84%, indicating the pressure on tech stocks and necessitating cautious investor sentiment amid potential risks.
- Tech Sector Weight Impact: With tech stocks comprising about 30% of the S&P 500's market cap, their underperformance can drag down the overall index even when other sectors perform well, highlighting the need for investors to monitor signals of sector rotation closely.
- Consumer Staples vs. Discretionary: The recent outperformance of consumer staples (XLP) over discretionary spending (XLY) may signal economic slowdown risks, prompting investors to pay attention to how this shift affects market sentiment and investment strategies.
- Ethereum Price Decline: Ethereum has fallen below the technical support level of 2600-2800, potentially heading towards the 1650-1750 range; if it stabilizes at this level, it could represent one of the best buying opportunities in years, warranting close observation from investors.
See More
Nvidia's Financial Outlook Appears Promising Ahead of Earnings Report
- Surge in Capital Expenditure: Microsoft invested $88.2 billion in AI in 2025 and is on track to exceed that in 2026, indicating strong commitment to AI demand, which will further drive Nvidia's GPU requirements.
- Strong Cloud Demand: Google anticipates capital expenditures of $180 billion in 2026, primarily for servers and data centers, underscoring sustained demand for AI solutions, positioning Nvidia as a key beneficiary.
- Solid Market Share: Nvidia holds a commanding 92% share of the data center GPU market, with its four largest customers (Microsoft, Meta, Amazon, and Google) accounting for 40% of its sales, highlighting the company's robust competitive edge in AI.
- Optimistic Earnings Outlook: Nvidia expects a 65% year-over-year revenue growth for Q4 of fiscal 2026, up from 62% in Q3, and if actual results exceed expectations, it will further boost investor confidence and drive stock price appreciation.
See More
Alphabet's AI Market Share Rapidly Expanding
- Market Share Growth: Alphabet's Gemini AI is rapidly capturing market share, increasing from 7% in 2022 to 21% in 2023, and is expected to surpass ChatGPT this year, demonstrating strong competitiveness in the generative AI space.
- Hardware Competitive Advantage: Alphabet's TPU chip serves as an alternative to Nvidia's GPUs and is being extensively utilized by Anthropic, which is likely to create additional hardware demand for Alphabet and further solidify its market position.
- Strong Financial Performance: Alphabet's revenue is projected to exceed $400 billion in 2025, reflecting a 15% year-over-year increase, while net income is expected to rise by 32% to $132.1 billion, showcasing its profitability and leadership in the AI sector.
- Significant Capital Expenditure Increase: Alphabet plans to double its capital expenditures to between $175 billion and $185 billion in 2026, indicating a strong commitment to long-term investments in AI, which is expected to further drive market expansion and technological innovation.
See More
Arista Networks: A Hidden Gem in AI Networking
- Market Opportunity: According to BNP Paribas, the total addressable data center networking market is projected to reach approximately $120 billion by 2028, positioning Arista Networks favorably with its ultra-fast Ethernet switches to meet the demands of cloud giants like Microsoft and Meta, thereby driving future growth.
- Technological Advantage: Arista's 400G and 800G high-speed Ethernet switching platforms are being widely deployed in next-generation AI cluster networks by 2025, with expectations for even faster 1.6T platforms by 2026, which will directly enhance the company's market share amid ongoing AI spending growth.
- Financial Performance: With over 20% annual revenue growth and gross margins exceeding 60%, Arista's revenues are expected to rise from $8.9 billion in 2025 to nearly $21 billion by 2030, reflecting a robust financial health and strong growth potential.
- Market Capitalization Outlook: Assuming the company's price-to-sales ratio reverts to its five-year historical average of 15.4x by 2030, Arista's market capitalization is projected to reach around $323 billion, representing an approximately 84% increase from its current market cap, indicating its investment value as a high-quality AI company.
See More
Meta Increases AI Investment, Profitability Under Pressure
- AI Budget Surge: Meta plans to increase its capital expenditures to $135 billion in 2026, an 87% rise from last year, aimed at supporting its AI Superintelligence team, which is expected to drive future technological innovation and market competitiveness.
- Profitability Pressure: As capital expenditures rise, Meta's depreciation expenses increased by 20% in 2025 and are expected to rise further in 2026, leading to a decline in operating margin from 48% in Q4 2024 to 41%, although management still anticipates overall operating income growth.
- AI-Driven Revenue Growth: Meta achieved a 24% revenue growth in Q4, driven by increased user engagement and stable ad price hikes, demonstrating its effectiveness in AI applications and market potential.
- Generative AI Potential: Meta is planning to leverage generative AI to attract more advertisers, combining personalized content and shopping agent features, which is expected to generate substantial ad revenue and further solidify its market position.
See More
Meta Tests Standalone Platform 'Vibes'
- Standalone App Testing: Meta is testing the standalone 'Vibes' platform, which allows users to create and share only AI-generated videos, aiming to enhance user experience and attract more content creators.
- User Growth Trend: Since its launch within the Meta AI app in September last year, 'Vibes' has gained strong early user engagement, with Meta noting that users are increasingly leaning into this format for creation and sharing.
- Immersive Experience: The new app provides a focused and immersive environment designed to enhance the experience of creating and discovering AI-generated videos, thereby driving user engagement and community interaction.
- Future Expansion Plans: Meta indicated plans to further expand the app based on community feedback, demonstrating the company's commitment to user needs and strategic positioning for future growth.
See More
Market Divergence: Tech Stocks Under Pressure
- Market Performance Divergence: Last week, the Dow Jones Industrial Average surged 2.50% to a new all-time high, while the Nasdaq fell 1.84%, indicating the pressure on tech stocks and necessitating cautious investor sentiment amid potential risks.
- Tech Sector Weight Impact: With tech stocks comprising about 30% of the S&P 500's market cap, their underperformance can drag down the overall index even when other sectors perform well, highlighting the need for investors to monitor signals of sector rotation closely.
- Consumer Staples vs. Discretionary: The recent outperformance of consumer staples (XLP) over discretionary spending (XLY) may signal economic slowdown risks, prompting investors to pay attention to how this shift affects market sentiment and investment strategies.
- Ethereum Price Decline: Ethereum has fallen below the technical support level of 2600-2800, potentially heading towards the 1650-1750 range; if it stabilizes at this level, it could represent one of the best buying opportunities in years, warranting close observation from investors.
See More
Nvidia's Financial Outlook Appears Promising Ahead of Earnings Report
- Surge in Capital Expenditure: Microsoft invested $88.2 billion in AI in 2025 and is on track to exceed that in 2026, indicating strong commitment to AI demand, which will further drive Nvidia's GPU requirements.
- Strong Cloud Demand: Google anticipates capital expenditures of $180 billion in 2026, primarily for servers and data centers, underscoring sustained demand for AI solutions, positioning Nvidia as a key beneficiary.
- Solid Market Share: Nvidia holds a commanding 92% share of the data center GPU market, with its four largest customers (Microsoft, Meta, Amazon, and Google) accounting for 40% of its sales, highlighting the company's robust competitive edge in AI.
- Optimistic Earnings Outlook: Nvidia expects a 65% year-over-year revenue growth for Q4 of fiscal 2026, up from 62% in Q3, and if actual results exceed expectations, it will further boost investor confidence and drive stock price appreciation.
See More
Alphabet's AI Market Share Rapidly Expanding
- Market Share Growth: Alphabet's Gemini AI is rapidly capturing market share, increasing from 7% in 2022 to 21% in 2023, and is expected to surpass ChatGPT this year, demonstrating strong competitiveness in the generative AI space.
- Hardware Competitive Advantage: Alphabet's TPU chip serves as an alternative to Nvidia's GPUs and is being extensively utilized by Anthropic, which is likely to create additional hardware demand for Alphabet and further solidify its market position.
- Strong Financial Performance: Alphabet's revenue is projected to exceed $400 billion in 2025, reflecting a 15% year-over-year increase, while net income is expected to rise by 32% to $132.1 billion, showcasing its profitability and leadership in the AI sector.
- Significant Capital Expenditure Increase: Alphabet plans to double its capital expenditures to between $175 billion and $185 billion in 2026, indicating a strong commitment to long-term investments in AI, which is expected to further drive market expansion and technological innovation.
See More
Arista Networks: A Hidden Gem in AI Networking
- Market Opportunity: According to BNP Paribas, the total addressable data center networking market is projected to reach approximately $120 billion by 2028, positioning Arista Networks favorably with its ultra-fast Ethernet switches to meet the demands of cloud giants like Microsoft and Meta, thereby driving future growth.
- Technological Advantage: Arista's 400G and 800G high-speed Ethernet switching platforms are being widely deployed in next-generation AI cluster networks by 2025, with expectations for even faster 1.6T platforms by 2026, which will directly enhance the company's market share amid ongoing AI spending growth.
- Financial Performance: With over 20% annual revenue growth and gross margins exceeding 60%, Arista's revenues are expected to rise from $8.9 billion in 2025 to nearly $21 billion by 2030, reflecting a robust financial health and strong growth potential.
- Market Capitalization Outlook: Assuming the company's price-to-sales ratio reverts to its five-year historical average of 15.4x by 2030, Arista's market capitalization is projected to reach around $323 billion, representing an approximately 84% increase from its current market cap, indicating its investment value as a high-quality AI company.
See More
