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Meta Platforms Jumps 33% in a Month: Should You Buy or Hold the Stock?
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Key Takeaways
META jumped 32.6% in a month, driven by strong ads, AI monetization and lower regulatory risk.
META expects 2026 capex of $130-$145B as AI infrastructure spending pressures free cash flow.
META sees AI tools boosting ads and business adoption, while Reality Labs losses remain elevated.
Meta Platforms (META - Free Report) shares have jumped 32.6% over the past month, outperforming the broader Zacks Computer & Technology sector’s appreciation of 4.7%. The rally can be attributed to strong advertising fundamentals, improving confidence in Meta’s AI monetization strategy, the launch of Muse and reduced regulatory uncertainty following the youth-safety settlement in August with U.S. state attorneys general. However, Meta’s massive infrastructure spending is expected to weigh on investor sentiment. So, what should they do with the stock? Let’s find out.
META’s AI Integration Boosts Ad Engagement Amid Challenges
META’s focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user as well as advertising engagement. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.6 billion daily users. Instagram reached 2 billion daily active users and Threads surpassed 500 million monthly active users in the second quarter of 2026. AI recommendations that deliver higher quality and more relevant content are expected to drive engagement. Instagram time spent increased at a double-digit rate in the second quarter of 2026, while Facebook video time grew 9% globally, supported by better recommendations.
Meta’s Large Language Models-powered advertising systems are improving content relevance, while AI-driven ad-ranking improvements are increasing conversions across Facebook and Instagram. Nine million small businesses were already using at least one of Meta’s AI advertising creative tools. This gives investors more evidence that Meta’s heavy AI spending is producing benefits in the existing business rather than depending solely on future AI products. The launch of Muse is noteworthy in this regard.
Meta is developing consumer agents alongside business agents that can communicate with customers, assist sales and eventually provide business-management capabilities. More than 1 million businesses were already using Meta business agents weekly on WhatsApp and Messenger during the second quarter of 2026. The company sees monetization opportunities from subscriptions, usage-based pricing and performance-based models similar to advertising.
These factors are expected to help Meta maintain its competitive prowess in the advertising space where it faces stiff competition from Snap (SNAP - Free Report) , Amazon (AMZN - Free Report) and Alphabet (GOOGL - Free Report) . Shares of Snap and Alphabet have returned 3.1% and 2%, respectively, while Amazon has dropped 1.3% in the past 30 days.
META Stock’s Price Performance
Image Source: Zacks Investment Research
Massive AI Investments Weigh on META’s Prospects
The biggest challenge remains converting enormous AI investments into sustainable returns. In second-quarter 2026, capital expenditures jumped to $31.08 billion from $17.01 billion in the year-ago period, while free cash flow plunged to just $784 million from $8.55 billion. The company now expects 2026 capital expenditures of $130-$145 billion as META builds servers, data centers and network infrastructure to support AI. The balance sheet quality also deteriorated, with long-term debt increasing to $83.66 billion as of June 30, 2026, from $58.74 billion at the end of 2025. Meta issued nearly $25 billion of long-term debt during the first half of 2026.
Meta acknowledges that AI and Reality Labs investments are reducing cash flow, operating margins and profitability and expects spending to continue increasing. Reality Labs reduced 2025 operating profit by approximately $19.19 billion, and 2026 Reality Labs operating losses are expected to remain similar to 2025 levels.
Moreover, stiff competition from AI agents like Google's Gemini, OpenAI's ChatGPT, Apple's AI ecosystem and other emerging agent platforms is a headwind for META’s AI agents.
Q3’26 Earnings Estimate Revisions Negative for META
The Zacks Consensus Estimate for third-quarter 2026 earnings is pegged at $6.39 per share, down 3.3% over the past 30 days, suggesting an 11.86% decline from the figure reported in the year-ago quarter.
Meta expects total revenues between $61 billion and $64 billion for the third quarter of 2026. The consensus mark for third-quarter 2026 revenues is pegged at $63.18 billion, suggesting 23.3% growth from the figure reported in the year-ago quarter.
META Shares Trade at a Premium
Meta shares are trading at a premium, as suggested by the Value Score of C.
In terms of the forward 12-month price/sales, META is trading at 6.46X, higher than the broader sector’s 6.10X, Amazon’s 3.04X and Snap’s 1.32X but at a discount compared with Alphabet’s 8.43X.
META Stock’s Valuation
Image Source: Zacks Investment Research
Conclusion
Meta’s strong advertising fundamentals, expanding AI-driven engagement and growing adoption of AI tools among businesses support its long-term growth prospects. The company is also beginning to demonstrate that its substantial AI investments can strengthen its core advertising business while opening new monetization opportunities through consumer and business agents. However, sharply higher capital expenditures, rising debt, persistent Reality Labs losses and pressure on free cash flow remain key concerns. Investors may therefore prefer to wait for a more attractive entry point while monitoring Meta’s progress in translating its massive AI investments into sustained earnings and cash-flow growth.
View the Zacks #1 Rank List
Image: Bigstock
Meta Platforms Jumps 33% in a Month: Should You Buy or Hold the Stock?
Key Takeaways
Meta Platforms (META - Free Report) shares have jumped 32.6% over the past month, outperforming the broader Zacks Computer & Technology sector’s appreciation of 4.7%. The rally can be attributed to strong advertising fundamentals, improving confidence in Meta’s AI monetization strategy, the launch of Muse and reduced regulatory uncertainty following the youth-safety settlement in August with U.S. state attorneys general. However, Meta’s massive infrastructure spending is expected to weigh on investor sentiment. So, what should they do with the stock? Let’s find out.
META’s AI Integration Boosts Ad Engagement Amid Challenges
META’s focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user as well as advertising engagement. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.6 billion daily users. Instagram reached 2 billion daily active users and Threads surpassed 500 million monthly active users in the second quarter of 2026. AI recommendations that deliver higher quality and more relevant content are expected to drive engagement. Instagram time spent increased at a double-digit rate in the second quarter of 2026, while Facebook video time grew 9% globally, supported by better recommendations.
Meta’s Large Language Models-powered advertising systems are improving content relevance, while AI-driven ad-ranking improvements are increasing conversions across Facebook and Instagram. Nine million small businesses were already using at least one of Meta’s AI advertising creative tools. This gives investors more evidence that Meta’s heavy AI spending is producing benefits in the existing business rather than depending solely on future AI products. The launch of Muse is noteworthy in this regard.
Meta is developing consumer agents alongside business agents that can communicate with customers, assist sales and eventually provide business-management capabilities. More than 1 million businesses were already using Meta business agents weekly on WhatsApp and Messenger during the second quarter of 2026. The company sees monetization opportunities from subscriptions, usage-based pricing and performance-based models similar to advertising.
These factors are expected to help Meta maintain its competitive prowess in the advertising space where it faces stiff competition from Snap (SNAP - Free Report) , Amazon (AMZN - Free Report) and Alphabet (GOOGL - Free Report) . Shares of Snap and Alphabet have returned 3.1% and 2%, respectively, while Amazon has dropped 1.3% in the past 30 days.
META Stock’s Price Performance
Image Source: Zacks Investment Research
Massive AI Investments Weigh on META’s Prospects
The biggest challenge remains converting enormous AI investments into sustainable returns. In second-quarter 2026, capital expenditures jumped to $31.08 billion from $17.01 billion in the year-ago period, while free cash flow plunged to just $784 million from $8.55 billion. The company now expects 2026 capital expenditures of $130-$145 billion as META builds servers, data centers and network infrastructure to support AI. The balance sheet quality also deteriorated, with long-term debt increasing to $83.66 billion as of June 30, 2026, from $58.74 billion at the end of 2025. Meta issued nearly $25 billion of long-term debt during the first half of 2026.
Meta acknowledges that AI and Reality Labs investments are reducing cash flow, operating margins and profitability and expects spending to continue increasing. Reality Labs reduced 2025 operating profit by approximately $19.19 billion, and 2026 Reality Labs operating losses are expected to remain similar to 2025 levels.
Moreover, stiff competition from AI agents like Google's Gemini, OpenAI's ChatGPT, Apple's AI ecosystem and other emerging agent platforms is a headwind for META’s AI agents.
Q3’26 Earnings Estimate Revisions Negative for META
The Zacks Consensus Estimate for third-quarter 2026 earnings is pegged at $6.39 per share, down 3.3% over the past 30 days, suggesting an 11.86% decline from the figure reported in the year-ago quarter.
Meta Platforms, Inc. Price and Consensus
Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. Quote
Meta expects total revenues between $61 billion and $64 billion for the third quarter of 2026. The consensus mark for third-quarter 2026 revenues is pegged at $63.18 billion, suggesting 23.3% growth from the figure reported in the year-ago quarter.
META Shares Trade at a Premium
Meta shares are trading at a premium, as suggested by the Value Score of C.
In terms of the forward 12-month price/sales, META is trading at 6.46X, higher than the broader sector’s 6.10X, Amazon’s 3.04X and Snap’s 1.32X but at a discount compared with Alphabet’s 8.43X.
META Stock’s Valuation
Image Source: Zacks Investment Research
Conclusion
Meta’s strong advertising fundamentals, expanding AI-driven engagement and growing adoption of AI tools among businesses support its long-term growth prospects. The company is also beginning to demonstrate that its substantial AI investments can strengthen its core advertising business while opening new monetization opportunities through consumer and business agents. However, sharply higher capital expenditures, rising debt, persistent Reality Labs losses and pressure on free cash flow remain key concerns. Investors may therefore prefer to wait for a more attractive entry point while monitoring Meta’s progress in translating its massive AI investments into sustained earnings and cash-flow growth.
Meta currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.