Meta owns Facebook, Instagram, WhatsApp and Messenger, used by 3.6 billion people a day, and sells the ads in between. AI has made those ads work better and revenue is growing 26%. But Meta is spending so heavily on AI data centers that free cash flow turned negative last quarter.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 22, 2026; the rating as of October 23, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price and its 52-week range. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, the day after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds META shares.
Meta earns nearly all its money from advertising on its Family of Apps. AI ranks what each person sees and which ads they are shown, and tools like Advantage+ let advertisers hand the whole campaign to Meta’s systems. Reality Labs, the headset and smart-glasses unit, loses about $4–5 billion a quarter.
The strategic bet is on building its own frontier AI models and the computing to run them, both to improve ads and to create new products such as Meta AI.
Takeaway. The ad machine is stronger than ever; the debate is about how much it costs to keep it ahead.
Revenue grew 26% to $64.6 billion, about $1.2 billion more than analysts expected, with more ads and a 14% rise in the price per ad. Costs grew 68%, mostly because of a $9.89 billion charge for the settlement with state attorneys general over teen mental health, part of an agreement to pay up to about $18.6 billion. Operating income fell 37% to $13.0 billion; without the charge it would have been about $22.9 billion, a 35% margin. EPS was $3.83, or about $7.40 without the charge.
Capital spending of $34.9 billion was more than the $32.8 billion of operating cash flow, so free cash flow was negative $2.1 billion. Meta again bought back no stock. Guidance: fourth-quarter revenue of $73–76 billion, 2026 expenses raised to $175–179 billion to include the charge, and capex narrowed to $135–145 billion. There is no 2027 capex figure yet, but management expects strong revenue growth throughout 2027, continued heavy AI investment and Reality Labs losses near $15 billion. Meta also announced a stock dividend of one new non-voting Class C share per share held, in effect a 2-for-1 split. The charter change that allows it takes effect on January 19, 2027; the record and payment dates are still to be set. The shares closed at $697.52 before the report and rose about 4% after hours.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $117.9B | $116.6B | $134.9B | $164.5B | $201.0B | $241.6B |
| Operating margin | 39.6% | 24.8% | 34.7% | 42.2% | 41.4% | 32.9% |
| Net income | $39.4B | $23.2B | $39.1B | $62.4B | $60.5B | $75.2B |
| Operating cash flow | $57.7B | $50.5B | $71.1B | $91.3B | $115.8B | $133.1B |
| Capital spending | $18.7B | $31.2B | $27.0B | $37.3B | $69.7B | $104.4B |
| Free cash flow | $39.0B | $19.3B | $44.1B | $54.1B | $46.1B | $28.6B |
2022 was the low point: revenue fell and Reality Labs spending peaked. The “year of efficiency” in 2023 restored margins above 40%. Capital spending has more than doubled since 2024, and free cash flow has fallen accordingly.
Meta had $82.5 billion of cash and securities against $80.9 billion of long-term debt at the end of September, so it is roughly net cash neutral after years of large net cash. Buybacks have stopped for now; the $2.10 annual dividend continues. The youth-safety settlement removes part of the legal risk management had warned about, but the cash has still to be paid and other cases remain open.
| Assumption | Base case | Basis |
|---|---|---|
| Revenue, 2026 | $256B | First nine months plus Q4 guidance |
| Growth, 2027 and 2028 | 18%, then 14% | AI-improved ads, slowing from 28% |
| Operating margin | 34% rising to 38% by 2031 | Excluding the one-off legal charge; depreciation from the build-out holds it below past highs |
| Net investment | $110B, $90B, $60B, $40B, then $1 per $2 of new revenue | Spending peaks in 2027 |
| Tax rate | 16% | Guidance of 15–17% |
| Discount rate | 11.2% | Beta 1.42, 4.5% premium |
| Terminal growth | 3.0% | With a 25% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 10% / 8% | 18% / 14% | 24% / 18% |
| Long-run operating margin | 30% | 38% | 44% |
| Discount rate | 12.2% | 11.2% | 10.2% |
| Value per share | $223 | $531 | $918 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $551. The value rose from $516 because 2026 revenue is now expected to be about $8 billion higher; spending plans are unchanged.
| Discount rate | 8.5% | 9.0% | 9.5% | 10.0% |
|---|---|---|---|---|
| Value per share | $845 | $766 | $698 | $641 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To reach today’s price, you need | Instead of |
|---|---|
| A long-run operating margin near 50% | 38%; Meta’s peak was in the low 40s |
| Revenue growth of about 21% a year for two years | 18% and 14% |
| A discount rate of about 9.5% | 11.2% |
Meta is closer to fair value than Amazon or Vertiv: a slightly lower discount rate or slightly faster growth closes most of the gap.
| Risk | Why it matters |
|---|---|
| AI spending without return | Capex of $130–145 billion a year has to lift revenue or it simply lowers margins. |
| Legal | After the $9.9 billion settlement, other youth-safety cases, EU regulation and antitrust can still cost money and limit ad targeting. |
| Reality Labs | Losses of $18–19 billion this year and about $15 billion in 2027, with no clear payoff date. |
| Ad cycle | Advertising is the first budget cut in a slowdown. |
Upside: WhatsApp business messaging, AI agents that sell for advertisers, and spending easing after 2027 would lift free cash flow quickly.
Advertising grew faster than expected and the legal charge is a one-off, but free cash flow is now negative and 2027 spending has no stated limit.
What would change the value: The first 2027 capex guidance in the fourth-quarter report, the timing of the settlement payment and whether buybacks resume are the next inputs.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $551. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades above our estimated value, which is 24% below the price.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating depends on that assumption: it would be Buy if the index grows 6% a year and Hold at 10%, against 8% here. How ratings work
| Measure | Meta Platforms | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 22.2% | 6.8% | 3 of 22 | Better than the median |
| Operating margin | 32.9% | 18.3% | 4 of 22 | Better than the median |
| Price to earnings | 21.4× | 17.0× | 12 of 19 | Worse than the median |
| Free cash flow yield | 1.8% | 5.1% | 17 of 21 | Worse than the median |
Peers: the 21 other S&P 500 companies in Communication Services with complete data (APP, CHTR, CMCSA, DIS, ECHO, FOX, FOXA, GOOG, GOOGL, LYV, NFLX, NWS, NWSA, OMC, RDDT, SKYD, T, TKO, TMUS, TTWO, VZ). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
Meta can afford the spending; the price needs it to pay off.
| What | Figures | Source |
|---|---|---|
| Latest results | $64.6B (Revenue, Q3 2026, +26%), 3.64B (Daily active people, +3%), +10% / +14% (Ad impressions / price per ad), 20% (Operating margin, from 40%) and others | Q3 2026 results; Market reaction; Stock split |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-31, 10-Q for the period to 2026-09-30 |
| Price at writing | $697.52 (close) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | 16 figures on October 23, 2026 | All match; one date clarified. Audit log |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 10.0% | 18.0% | 24.0% |
| Growth, second forecast year | 8.0% | 14.0% | 18.0% |
| Operating margin, near term | 30.0% | 34.0% | 36.0% |
| Operating margin, long run | 30.0% | 38.0% | 44.0% |
| Net investment, first years ($B) | 130/110/80/60 | 110/90/60/40 | 90/70/40/25 |
| Discount rate | 12.2% | 11.2% | 10.2% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $527.68 |
| Likely range, 10th to 90th percentile | $298.31 to $772.88 |
| Median | $517.04 |
| Chance the value is above the price | 18% |
| Chance it is cheaper than the S&P 500 | 60% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.