Meta Platforms (META) has become the poster child for what the market wants from AI right now: translating AI into real revenue, investing heavily in optimized data centers and proprietary chips, developing more relevant open-source LLMs, and—perhaps most importantly—CEO Mark Zuckerberg is now tying the AI story to concrete financial results, unlike the disappointing “metaverse bet.”
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Meta hasn’t treated AI as a futuristic “moonshot,” like humanoid robots, for example. Instead, it has shown the market that every dollar invested today tends to generate higher revenue per user and stronger cash flow. This creates a clear, self-reinforcing cycle for investors, demonstrating that massive CapEx deployment is purposeful spending with a definitive return.
Given that Meta is arguably one of the best—if not the best—companies in the market to execute on AI, I believe it deserves a Buy rating, despite the naysayers fretting about relative valuations.
Meta’s Monetization Flywheel
At the heart of Meta’s AI strategy is a self-reinforcing monetization flywheel, which consists of better AI models driving more relevant recommendations and ads. These boost engagement and time spent on the platform, creating more ad inventory and higher CPMs (the cost an advertiser pays for 1,000 impressions).
This is arguably the cleanest, least speculative AI payback in the current cycle. In practice, AI-driven optimization has already delivered a 5% increase in ad conversions on Instagram and a 3% lift in Facebook ad performance in the last quarter alone.
Within messaging, Meta’s AI agents have helped small businesses respond to queries, recommend products, and route payments—turning click-to-WhatsApp ads into a full-funnel solution and unlocking new ad formats. It may not sound like much, but with Meta’s ~$40 billion in quarterly ad revenue, it becomes rather meaningful.
Each AI feature already reaches the apps of 3.48 billion active users (according to last quarter’s data)—more than half of the world’s internet users. Engagement is already visible, as AI recommendations and early creative tools like AI video editing have driven time spent on Facebook up 5% and Instagram up 6% quarter-over-quarter. MetaAI, the assistant product, has surpassed 1 billion MAUs, providing strong evidence that AI-native products can scale as quickly as ad-tech features.
Scaling AI Without Sacrificing Discipline
But beyond building better AI models, Meta has done all of this in a financially disciplined way. By controlling computational costs with proprietary MTIA chips and AI-optimized data centers, and leveraging open-source LLaMa models, Meta ensures that every AI dollar drives measurable ROI. META may have cracked the code behind AI spend with its investments generating a tangible return every quarter.
Not stopping there, Meta plans to spend $66 billion to $72 billion on AI infrastructure in 2025 alone—an annual increase of ~$30 billion—including a $50 billion data center in Louisiana, the largest ever built. In fiscal 2026, capital expenditures (CapEx) could potentially exceed $100 billion. Even with this massive spending, free cash flow in Q2 was $8.5 billion, reinforcing the importance of cost discipline.
Over the last twelve months, Meta generated $102.3 billion in operating cash flow, of which $52.1 billion has already been allocated to CapEx. Few companies in the world can afford to deploy $170 billion in CapEx over two years and still generate meaningful free cash flow—a position that speaks to Meta’s scale and financial discipline.
Meta’s Valuation Set in Context
Clearly, Meta has not only positioned itself as a potential big winner in practical consumer monetization but is also arguably becoming the most self-reliant among Big Tech peers in the AI race. A premium valuation is therefore reasonable, even though the company’s somewhat cyclical ad revenues introduce some embedded risk.
When it comes to valuing Meta, the most useful single metric is likely the price-to-free-cash-flow ratio, due to the combination of massive cash generation from advertising and the significant, long-term investments in AI and infrastructure. Based on the ~$50.1 billion in free cash flow generated over the last twelve months, this implies Meta is trading at a free cash flow multiple of 37x. While this may seem high, it reflects the market’s strong optimism about Meta’s AI growth story.
For context, Big Tech peers trade at much higher multiples: Microsoft (MSFT) and Alphabet (GOOGL) trade at 43x and 42x free cash flow, respectively, while Amazon (AMZN) stands out at 187x. If we compare P/E, META stock is on the lower side within the sector, trading at ~27x earnings compared to a sector median of 20x.
What is the Price Target for META Stock in 2025?
Analysts remain overwhelmingly bullish on Meta, with 42 out of 48 recommending a Buy and only six recommending Hold. META’s average price target stands at $873.14, implying roughly 14% upside from the current share price.
The Case for Meta as a Long-Term AI Compounder
It’s hard not to get excited about Meta’s thesis right now. The company has emerged as a massive winner in the AI race, virtually executing the playbook the market wants to see: practical monetization, cost discipline in infrastructure, an open-source strategy, and product integration.
Given the speed at which Meta is integrating AI models into its business, there is arguably still significant runway for these trends to continue—especially with the massive cash infusion into new investments and the company positioning itself as increasingly self-reliant among Big Tech peers. Meta has consistently demonstrated the viability of its AI initiatives with tangible results every quarter, making it difficult for skeptics to build a compelling counter-thesis. For these reasons, I reiterate Meta as a Buy, based on plausible valuations.