Internet Software/Services · #10 in the Retail 100

Meta Platforms

What it sells

Ads in its apps98% of revenue, Q2 2026
Ads in Facebook and Instagram feeds, Reels and Stories, sold by auction. Meta's AI decides which ad each person sees.
Messaging and subscriptions2% of revenue, Q2 2026
Businesses pay to message customers on WhatsApp, and people pay for subscriptions like Meta Verified. Small, but growing faster than ads.
Reality LabsUnder 1% of revenue, Q2 2026
Quest VR headsets and AI glasses. It lost $4.6 billion in Q2 2026, a cost the ad business pays for.

Who buys it

Businesses of every size buy ads through self-serve tools, including advertisers based in China, who use a few resellers. The U.S. and Canada were 39% of Q2 2026 revenue. Most growth in ad views comes from Asia and other regions where ads sell for less.

Where you've seen it

Every "Sponsored" post in a Facebook or Instagram feed, and the ads between Stories and Reels.

The backstory

In 2021 Apple let iPhone users block ad tracking, which Meta said would cut the next year's sales by about $10B. It responded by rebuilding its ad matching around its own AI models, which management says now raise ad clicks and prices. Now it is spending $135–145B in 2026 on AI data centers, betting the same models keep improving ads and power new products like Muse.

How the business makes money

Why Meta's ad machine now pays for its AI build^{30,32,6,23,41}

Step 1
About 3.64B people use a Meta app every day, more than any rival can show ads to.
Step 2
Meta's own AI picks which ad each person sees. Better results let it charge more: the average price per ad rose 14% last quarter.
Step 3
Ads brought in $63.1B last quarter, nearly all of Meta's revenue.
Step 4
That cash pays for AI data centers, $34.9B last quarter, and the losses at Reality Labs, its glasses and VR unit.
What shareholders get
Spending now exceeds the cash coming in, by $2.1B last quarter, so Meta is selling new shares to cover it. That shrinks each holder's slice unless AI products like Muse start earning money.

Advantages

3.6B daily users and their ad data

Major advantage

Meta's biggest advantage. No rival shows ads to as many people every day, and more users and ad results give its AI more data to learn from, which raises ad prices.^1,3

A built-in launch pad for new AI products

Strong advantage

A strong launch pad. Meta can promote a new app inside its existing ones, and house ads pushed Muse, whose early mobile downloads grew faster than ChatGPT's did.^7,17,18

Its own AI lab

Supporting

Useful, but costly. Meta Superintelligence Labs builds the Muse Spark models in-house, so Meta does not license its core AI, though it still rents extra computing from providers like CoreWeave.^6,8,26

What's changing

Meta turns to shareholders to help pay for AI

Meta is now selling stock to fund its AI build. On October 26 it sold $25B of Class A shares, delivered by November 2027, and $12.5B of preferred shares that convert to stock in 2029. It plans up to $60B more from early 2027. That is dilution, new shares shrinking each holder's stake: by our math about 2% so far, roughly 6% if the full plan is sold.^41,42,43,44

Competitors

Who else an investor would consider, and how they compare.

Company	Market value	What it does	Compared with Meta Platforms
Meta Platformsthis stock	$1.59T	Meta sells ads to reach the 3.6 billion people who use Facebook, Instagram, WhatsApp or Messenger each day. Nearly all its revenue is ads, which pay for its costly bets on AI and smart glasses.
AlphabetGOOGL	$3.88T	Sells ads on Search and YouTube, plus Google Cloud rentals to pay for AI.	Both spend big on AI; Alphabet can rent capacity out through its cloud, Meta can't.¹¹
AmazonAMZN	$2.69T	Sells ads on its shopping site, plus AWS cloud to pay for AI.	Amazon's ads reach people as they buy; Meta's reach them earlier, while browsing.¹²
TikTok U.S. (Oracle, Silver Lake, MGX joint venture)private	—	Short-video app, now run by a U.S. joint venture after the ban threat ended.	TikTok competes with Instagram Reels for young users' time and video ad budgets.¹³
AppLovinAPP	$87.24B	Places AI-targeted ads inside mobile apps, now expanding to online shopping brands.	AppLovin owns no social apps; it places ads in others' apps, chasing Meta's advertisers.¹⁴

Leadership

Who runs the company, and how the stock has done under the CEO.

META 16xS&P 500 +647%Total return with dividends since listing in May 2012 · log scale

2013201520172019202120232025

Mark ZuckerbergFounder, Founder, Chairman and CEO22 yrs, since 2004

Susan LiCFO4 yrs

Alexandr WangChief AI Officer1.4 yrs

Dina Powell McCormickPresident and Vice Chairman9 mo

Wall Street on Zuckerberg: PositiveJPMorgan raised its price target to $920, saying Meta's Muse AI models are off to a strong start. Raymond James raised its price target to $860, citing more than 300,000 daily Muse downloads.^L7

Leadership sources (7) · researched Oct 2026

L1Mark Zuckerberg · Wikipedia, 2026-10-09
L2Meta Reports Second Quarter 2022 Results; Announces Plans for Chief Financial Officer Transition and Chief Strategy Officer Appointment · Meta Investor Relations, 2022-07-27
L3Meta offers stock awards, options for executives, aggressive timing · CNBC, 2026-03-24
L4Meta restructures its AI unit under Superintelligence Labs · TechCrunch, 2025-06-30
L5Meta debuts new AI model, attempting to catch Google, OpenAI after spending billions · CNBC, 2026-04-08
L6Dina Powell McCormick Joins Meta as President and Vice Chairman · Meta Newsroom, 2026-01-12
L7Three Major Analysts Bet on Meta's AI Pivot With Price Targets Approaching $920 · 24/7 Wall St., 2026-09-25

Bull vs. bear: two bets on the same stock

1
A share is a small slice of the company. Its value comes from the profits the company will make in the future.
2
Nobody knows those profits yet. Buyers (bulls) pay today's price betting they'll beat what most people expect. Sellers (bears) bet they'll fall short.
3
When results come in, the price moves toward whichever side was right, and that side makes money.

The question they disagree on

Will ad growth stay above 20% and AI products bring in enough new revenue for free cash flow to turn positive, so Meta can skip the up-to-$60B of extra stock it plans to sell from 2027?^{30,32,34,38,33,11,18,25,41,42,45}

Bull case: why buyers buy

AI keeps making ads work better and Muse becomes a business, so free cash flow recovers and Meta sells little of the extra stock it plans.

The ad business keeps beating forecasts. Meta's fourth-quarter revenue guidance topped what analysts expected.
The core business is still very profitable. Without the legal charge, third-quarter operating income would have been $22.88B.
Muse is catching on. Zuckerberg said over 10M people in the U.S. and Canada set up Muse agents within weeks, and many use it daily.
Meta can fund the build without straining its credit. It held $82.45B of cash and securities at September's end and keeps high-grade Aa3/AA- debt ratings.

Bear case: why sellers sell

Ad growth slows while spending keeps climbing, and with no cloud business renting out the extra capacity, Meta keeps selling new shares, shrinking each holder's slice.

Lenders are getting nervous. After Q3, the yearly cost to insure Meta's debt against default hit a record 1.15% of the amount insured.
Shareholders now pay for part of the build. Beyond October's share sales, Meta plans to sell up to $60B more stock starting in 2027.
Meta's AI has no outside customers yet. It does not rent AI capacity to cloud customers, and Zuckerberg gave no revenue or customers for its planned enterprise platform.
Legal risk is not over. Meta said youth-related trials are scheduled in the coming months, after its settlement with the states.

Where Delphi landsholdWe think today's price already weighs both sides fairly.See why

What to watch

The numbers that will settle the debate.

Ad revenue growth▼ worsening

Up 26% in the third quarter, with ads shown up 10%. Fourth-quarter revenue guidance is $73–76B, about 22–27% above a year earlier.^30,35,38

Shows whether AI keeps lifting ads. Growth slowed from 33% in the first quarter to 27% in the second.

Free cash flow▼ worsening

Negative $2.12B in the third quarter, the first negative quarter since 2012, against positive $10.6B a year earlier.^30,45

Shows whether ad profit still covers AI data-center spending, or whether Meta must keep selling shares to fill the gap.

Operating profit: apps vs. Reality Labs▼ worsening

In the third quarter the apps earned $17.1B, down from $25.0B a year earlier. Reality Labs lost $4.1B on $443M of sales, versus a $4.4B loss.³⁰

Shows whether ad profit outgrows AI costs and the Reality Labs losses it pays for.

Next earnings report

Jan 27

In 83 days

Earnings calls page ↗

Expected earnings per share: $8.35
Expected revenue: $74.97B

What to listen for: Meta's first 2027 capital spending and expense outlook, which management says it will detail on the Q4 call, weighed against ad growth and Muse usage.^32,35

What would prove this wrong

✕Meta's ad growth trails Amazon's and Alphabet's for several quarters.
✕2027 spending guidance rises sharply with no new revenue source disclosed.
✕Muse usage fades after the launch promotion ends.
✕More youth-harm verdicts or penalties add multi-billion charges beyond the state settlement.

Our ratingHoldas of Nov 3 close, $621.03 · what ratings mean

Ads grew 26% and the stock trades below its five-year median valuation, but free cash flow is negative and share sales dilute holders, so expected returns trail the market.

12-month target: $702.94 (+13.2%)
Plus dividend: +0.3%
S&P 500, same method, with dividends: +18.5%
Expected vs the market: -4.9 points

The math behind the recommendation

Three 12-month price scenarios, weighted by probability, compared with the S&P 500 under the same method.

Now $621.03

Target $702.94

bull case20% likely

$894.14 +44%

Ads keep growing over 20%, Muse starts earning revenue and the 2027 spending outlook lets free cash flow recover, pushing earnings toward the top of forecasts.

$41.48 earnings per share × 21.6 = $894.14

base case50% likely

$721.12 +16%

Ads grow about 20%, but 2027 spending stays near this year's pace and Muse earns little, so earnings match the analyst average.

$37.25 earnings per share × 19.4 = $721.12

bear case30% likely

$545.17 -12%

Ad growth slows below 20% while 2027 spending rises sharply with no new revenue source, and more youth-harm charges cut earnings.

$34.84 earnings per share × 15.7 = $545.17

Why these odds: Forecasts for 2027 earnings fell 3.8% in 90 days, though in the last 30 days seven analysts raised them and three cut. We add 60M shares (2.3%) from the October stock sale. Negative free cash flow and unannounced 2027 spending keep the downside larger.

How the prices are built: Wall Street expects earnings per share of $37.25 for the year starting a year from now (analysts range from $32.42 to $45.71). Today the stock trades at 18.4 times next year's earnings per share; its five-year middle is 22.2.^{30,34,35,36,37,42,43,44}

What tests the call: Q4 2026 results and the first 2027 spending and expense outlook (date estimated) (Jan 27)

Buy means expected to beat the S&P 500 by 10+ points over 12 months; Sell means expected to trail it by 10+. Inputs gathered Oct 28; the recommendation updates with the price every day. Model-generated, not personalized investment advice. How ratings work · Track record

What the price assumes

At $621.03, Meta Platforms is priced about like the average stock

Meta Platforms trades at 18 times the earnings analysts expect over the next 12 months. That ratio is the multiple: what investors pay today for each dollar of a year's earnings. That is below its five-year middle of 22.

Analysts expect earnings to grow about 10% the year after, against about 16% for the S&P 500. The S&P 500 trades at 19 times. The price assumes Meta Platforms's earnings grow roughly in line with forecasts, with no premium for doing better.

Meta Platforms multiple: 18×
S&P 500 multiple: 19×
Base case: +16%
Bear case: −12%

The skewOur bear case loses about 76¢ for every $1 our base case makes. That ratio, how much you stand to lose against how much you stand to make, is the skew.

Last earnings

No reported quarters available.