Meta Platforms (META) stock may be handing FOMO-suffering tech investors a rare opportunity. The $1 trillion social media titan recently suffered a severe drawdown, with shares tumbling ~20% from its September all-time high of $795.
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At its worst point in late November, the stock had surrendered nearly a quarter of its value. While a double-digit decline in a market leader often signals fundamental trouble, META stock’s recent pullback appears like a disconnect between market sentiment and business reality.
The “Magnificent Seven” company is not broken. It is simply in the middle of an expensive, high-stakes evolution. The tech stock’s volatility offers compelling entry points for new investors with a long-term perspective, as well as a discounted opportunity to play an AI-powered growth story gaining momentum. I remain stoutly bullish with the recent pullback signalling a superb buying opportunity.
META’s Earnings Miss and Spending Shock
To understand why Meta Platforms’ stock fell, investors may look at the third-quarter earnings report that triggered the sell-off. On the surface, it looked like a disaster.
Meta reported an 83% drop in net earnings per share (EPS) to $1.05, missing Wall Street estimates by a massive margin. However, this figure was misleading. The miss was entirely due to a $15.9 billion non-cash tax charge resulting from legislative changes in Donald Trump’s “Big Beautiful Bill, which wiped out its deferred tax assets. Without this one-time accounting hit, Meta would have likely posted EPS closer to $7.25, representing robust year-over-year growth.
The anxiety trigger for investors was not the tax bill but the spending bill. Meta Platforms is aggressively ramping up capital expenditures (CapEx) to acquire, upgrade, and maintain computing assets, such as artificial intelligence (AI) data centers. Management revealed that 2025 CapEx would range from $70 billion to $72 billion, with even higher spending projected for 2026.
Founder and CEO Mark Zuckerberg is aggressively doubling down on his bet on artificial intelligence. Investors, still bruised from the company’s previous heavy spending on the Metaverse, are worried that these ballooning costs will crush profit margins. Meta’s operating margins recently shrank from 43% to 40%.
Zuckerberg’s Risky Yet Necessary AI Wager
Mark Zuckerberg is no longer just building a social network empire. He is building what he calls “personal superintelligence for everyone.” During the earnings call, he made it clear that Meta will aggressively front-load its infrastructure capacity. The goal is to train Llama, the company’s open-source AI model, to evolve to become the industry standard.
This strategy carries the risk of overshooting. Meta might build more computing power than it immediately needs. If revenue from these AI investments doesn’t materialize quickly, the company could be left with depreciating assets and shrinking operating margins. However, from his Q3 2025 earnings call comments, Zuckerberg’s philosophy prioritizes absolute profit growth over maintaining high operating margins.
Mark Zuckerberg added that his general goal is to “build a business that maximizes value for people who use our products and maximizes profitability, not margin.”
His view is that the risk of undershooting in AI is far greater than the risk of overshooting. If Meta arrives late to the superintelligence era, it loses its competitive moat. If it gets there early, with excessive computing capacity, the company can simply rent that excess compute to third parties or use it to power its own core apps more efficiently. The visionary founder is demonstrating his entrepreneurial instincts; the stakes are high, but early results are already on display in Meta’s ads business.
META’s Core Ads Business Demonstrates Strength
While the stock market frets over future AI costs, Meta’s core advertising engine is firing on all cylinders. Third-quarter revenue surged 26% year over year to $51.2 billion. This growth is being driven by the very AI technology that investors are worried about.
Meta has deployed massive AI “transformers” to power its recommendation engines across Facebook and Instagram. AI systems are getting better at predicting and recommending what users want to see, keeping them scrolling for much longer.
The AI investments’ early results are tangible. Time spent on Facebook rose by 5% in the past quarter, while Instagram usage jumped significantly. More importantly, the average price per ad increased by 10%. Advertisers are seeing better performance and are willing to pay more to access Meta’s 3.5 billion user base.
The company’s AI-powered ad tools are now generating an annual run rate of over $60 billion. This growing revenue source is fueled by the infrastructure investments Meta strategically made years ago.
New Products Include Vibes, Glasses, and the Next Frontier
The bullish case for Meta Platforms stock extends beyond better ads. The company is actively developing consumer-facing AI products that could open entirely new revenue lines. One prominent example is “Vibes,” a new generative AI tool that allows users to create novel content experiences. Early data shows strong retention, suggesting that AI will drive the next wave of social sharing.
Furthermore, Meta is slowly finding success in hardware with its Ray-Ban Meta Smart Glasses. Revenue from the Reality Labs segment jumped 74% year-over-year, driven largely by strong sales of these glasses and the Quest headset. While this segment remains a small slice of the overall revenue pie, the demand for AI-integrated eyewear validates Zuckerberg’s vision of a post-smartphone future. The glasses allow users to interact with Meta AI in the real world, creating a sticky ecosystem that keeps users within the Meta family of apps.
META Growth at a Reasonable Price
Following the recent correction, META stock looks increasingly attractive on valuation grounds. The stock trades at a forward price-to-earnings (P/E) ratio of approximately 25. While this is higher than the broader sector average, it is lower than the average for the Internet Content and Information industry, which sits around 30.
When considering the company’s cash flow generating agility, the valuation picture gets even better. Meta’s Enterprise Value to Free Cash Flow (EV/FCF) multiple is 36.2, significantly lower than the industry average of 42.2. Essentially, investors are getting a high-growth AI leader at a discount compared to its peers.
Is META Stock a Buy, Hold, or Sell?
Despite the panic over AI bubbles and excessive capex spending, Wall Street analysts tracked by TipRanks remain overwhelmingly bullish on the stock. META stock commands a Strong Buy consensus rating. Out of 43 analysts covering the stock in the past three months, 36 have issued Buy ratings, with only 6 Holds and 1 Sell. The average price target stands at $832.06, which implies an upside potential of ~25% from current levels.
While the market reacted negatively to the short-term CapEx shock, analysts see the long-term value proposition remaining intact.
Playing the Long Game with META Stock
The recent sell-off in META stock could be a classic case of short-termism. The market has punished the Magnificent Seven firm for making necessary investments to secure its future dominance among AI heavyweights. Meta is undeniably an expensive growth play, and the uncertainty surrounding AI returns is a valid risk.
However, with a core advertising business growing at 26%, a pipeline of innovative products that retain its multi-billion user traffic, and a valuation that has become significantly more reasonable, the stock looks like a compelling buy for investors willing to tolerate the volatility of an aggressive AI investment cycle.