Quick Read
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Meta's ad business grew revenue 26% to $65B, but a $10B legal settlement crushed reported EPS to $3.83 versus a $5.70 consensus.
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Meta has lagged the S&P 500 over the past year, down 6% while the index gained 10%, yet 55 of 63 analysts rate it a Buy with 40% upside to their average target.
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Meta plans between $135B and $145B in 2026 capex, a level of spending that has already pushed free cash flow negative and driven total costs up 68%, cutting operating margin from 40% to 20%.
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Meta Platforms( NASDAQ:META ) trades at $606.73, with a long-term case that extends through 2030. The stock has fallen 16.67% in a month because a legal charge wiped out much of its third-quarter profit, even though revenue grew 26.1%.
Meta owns Facebook, Instagram, WhatsApp, Messenger and Threads, which together reach 3.64 billion daily active people. Advertising brings in about 98% of revenue. Bulls argue Meta is the only tech giant successfully using AI to massively expand its existing core profit engine today.
Revenue came in at $64.60 billion, ahead of estimates. GAAP EPS of $3.83 missed the $5.70 consensus, though, after a $9.89 billion settlement with 52 state attorneys general over teen mental health claims.
AI Is Already Paying Off Inside Meta's Ad Machine
Without the charge, EPS would have been $7.40. Ad impressions grew 10% and average price per ad rose 14%, which shows AI-driven ranking is raising both volume and pricing.
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The stock trades at 21 times trailing earnings and 18 times forward earnings. Analysts expect EPS to rise from $29.2069 in 2026 to $33.9588 in 2027. Over the past 30 days, 2027 estimates saw 7 upward revisions and 3 downward ones. Muse, Meta's personal agent, signed up more than 10 million users in about a month and a half. Reality Labs losses should also narrow to about $15 billion in 2027.
Capex and Courtrooms Threaten Meta's Cash Story
Meta plans $135 billion to $145 billion in 2026 capex, and third-quarter free cash flow turned negative at $2.12 billion. Total costs rose 68%, and operating margin fell to 20% from 40%. Debt of $83.7 billion now tops the company's $82.4 billion in cash. That spending goes to the power, cooling, and networking suppliers behind every AI data center, which we profiled in a free report on seven AI infrastructure names that aren't chipmakers.
Several more youth-related trials are scheduled in the coming months. Meta is also creating a new nonvoting share class for capital raising and acquisitions, which opens a path to dilution. Analysts have cut their 2026 EPS estimates from $33.0465 to $29.2069 over 90 days.
Fourth-Quarter Guidance on 2027 Spending Could Settle the Debate
The ad business remains strong, but spending is rising too fast to ignore. Management has not given a 2027 capex figure yet and usually shares one on the fourth-quarter call. Muse also needs to become more than 10x more compute-efficient over the next year before it can turn a profit at scale.
Two outcomes would strengthen the bull case: fourth-quarter revenue inside the $73 billion to $76 billion guidance and a contained 2027 capex plan. Another major legal loss or a new jump in spending would strengthen the bear case.
Analysts See Nearly 40% Upside After a Year of Lagging the Market
Meta currently trades at $606.73, while the average analyst target is $848.38. That means 39.8% upside. Targets can change quickly, so treat them as one data point. Here is how the 63 covering analysts rate the stock:
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Strong Buy: 8
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Buy: 47
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Hold: 7
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Sell: 1
Over the past year, Meta fell 6.12% while the S&P 500 rose 10.28%. Year to date, Meta is down 7.86% while the index is up 10.3%. Over five years, Meta returned 84.67%, compared with 61.85% for the S&P 500.
Meta's Long-Term Case Through 2030 Strengthens as the Legal Discount Fades
At $606.73, Meta's long-term case rests on two drivers.
The main path higher runs through the ad business. Ad prices and volumes are both rising. Once the settlement charge drops out of year-over-year comparisons, reported earnings should move back toward the $7.40 level the quarter delivered without it.
Muse is the second driver. Commerce fees, subscriptions and enterprise services give Meta several ways to make money from it starting in 2027. Meta can also reach at least 500 million small businesses that already use its apps. At 18 times forward earnings, investors pay a modest multiple for 82% gross margins and a 30.24% return on equity.
The thesis fails if 2027 capex rises again without matching revenue growth, if the youth trials produce repeated multibillion-dollar losses, or if Muse's efficiency gains stall. A share price held down by litigation, on top of an ad business that continues compounding, frames the long-term case through 2030.
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