Meta Plans to Enter Cloud Computing Market
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Source: CNBC
- Cloud Business Outlook: CEO Mark Zuckerberg hints at Meta's plan to sell excess computing power, which, despite lower margins than its dominant online ad business, could provide new revenue streams and help diversify the company's business structure.
- Stock Price Recovery: After four consecutive quarters of decline, Meta's stock surged 9% at the start of the third quarter, marking its largest rally in over five months, indicating investor optimism regarding the company's cloud computing strategy.
- Increased Capital Expenditure: Meta raised its 2026 capital expenditure guidance by $10 billion to $145 billion, with part of the funding sourced from a $25 billion bond sale, reflecting the company's commitment to cloud infrastructure despite skepticism about its spending efficiency.
- Competitive Market Pressure: While Meta's cloud computing plans attract attention, analysts suggest it may not directly compete with major players like AWS, Azure, and Google Cloud, but rather follow a strategy similar to CoreWeave and Nebius, focusing on providing AI-specific computing products.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 612.910
Low
655.15
Averages
824.71
High
1117
Current: 612.910
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.
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- Reliance on Ad Revenue: In Q1 2025, Meta reported $55 billion in ad sales, accounting for 98% of total revenue, with ad impressions increasing by 19% year-over-year and average ad prices rising by 12%, highlighting strong performance in advertising but increasing dependence on future growth.
- AI Strategy Priority: CEO Mark Zuckerberg emphasized during the Q1 2025 earnings call that Meta aims to leverage AI to enhance advertising capabilities, with the goal of making advertising a larger share of global GDP, making the success of this strategy critical for long-term revenue growth.
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- Strategic Implications: By renting computing capacity, the company can respond more flexibly to market demand fluctuations while reducing fixed costs, thereby strengthening its adaptability in the highly competitive tech industry.
- Future Outlook: The company plans to further expand this business model in the future, exploring more collaboration opportunities to achieve sustainable growth and increase market share.
See More
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- Investment Recommendations: The absence of Meta Platforms from the analyst team's list of 10 recommended stocks indicates a cautious market sentiment regarding its future performance, which could impact investor confidence.
- Historical Return Comparison: Previously recommended stocks like Netflix and Nvidia achieved returns of 418,761% and 1,195,804% respectively after their recommendations, highlighting the investment value of high-potential stocks.
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- ETF Investment Advantages: Picking individual winners is notoriously challenging, so investors are advised to consider buying exchange-traded funds (ETFs) like the Invesco S&P 500 Quality ETF (SPHQ), which currently allocates 42% to tech, reflecting the sector's earnings and revenue growth potential.
- Diversification and Durability: This ETF is roughly 80% weighted to large caps and 20% to mid- and small caps, a profile that not only complements ETFs tracking the S&P 500 but also provides protection during market downturns, helping investors navigate future market challenges.
See More
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- Lack of Investment Recommendations: The Motley Fool analysts believe there are currently 10 stocks with greater investment potential, and Meta's exclusion may reflect its relative disadvantage in the highly competitive tech sector.
- Historical Performance Comparison: Notable examples like Netflix and Nvidia yielded returns of 418,761% and 1,195,804% respectively when recommended, suggesting that Meta's absence indicates insufficient growth potential to attract investors.
- Market Performance Discrepancy: With Stock Advisor's average return at 918%, significantly outperforming the S&P 500's 208%, Meta's omission from the recommendation list could negatively impact its stock performance, prompting investors to carefully assess its investment value.
See More
