Since the start of 2026, Meta Platforms’ stock has suffered a significant slump. As of early this year, the company’s shares have fallen approximately 14% cumulatively, dropping about 28% from the record high of nearly $780 set at the end of 2025. The market generally believes that this sell-off is not due to weakening demand for the company’s core advertising business, but rather to investor concerns over management’s aggressive capital expenditure plans and new regulatory pressures.
Meta Platforms (META) is a global giant in the social media space, owning popular applications such as Facebook, Messenger, Instagram, and WhatsApp, with billions of users using its products every day. Advertisers view these apps as efficient channels to reach a broad audience, which is a key reason why the company continues to generate substantial revenue.
From an operational data perspective, Meta’s business foundation remains strong. For the full year 2025, the company’s revenue reached $201 billion, a year-over-year increase of 22%. This growth was driven by improved monetization through AI-enhanced ad targeting technologies across its family of apps, including Facebook, Instagram, and WhatsApp. The company’s operating margin held steady at 41%, and free cash flow remained at a robust level of approximately $44 billion.
In the most recent quarter (Q4 2025), Meta’s revenue grew 24% year-over-year to $59.9 billion. However, costs and expenses rose sharply by 40% year-over-year, causing operating profit to increase by only 6%. In the previous quarter, the revenue growth rate was 26%, while the cost growth rate was also as high as 32%. This indicates that the company’s expenditure growth continues to outpace its revenue growth.
The market’s primary concern regarding Meta stems from the explosive growth of its capital expenditures. Capital expenditures are projected to reach as high as $135 billion in 2026. Bearish arguments suggest that this could repeat the mistakes of the metaverse project—massive investments with unclear returns.
However, bullish investors believe that the investment environments for AI and the metaverse are fundamentally different. Current AI-related spending is directly empowering the company’s existing advertising business. For example, the newly launched Advantage+ suite of AI tools has already improved click-through rates, optimized the creative efficiency of ad campaigns, and enhanced content recommendations, leading users to spend more time within the Meta ecosystem.
From a valuation standpoint, Meta’s current forward price-to-earnings (P/E) ratio is approximately 19 times. This is the lowest level since last summer and is also well below its historical average P/E ratio of about 23 times. Historical experience suggests that after previous market sell-offs of Meta’s stock due to increased spending, patient investors have often been rewarded with excess returns once the incremental revenue becomes apparent.
In summary, although Meta faces risks from legal proceedings (related to social media addiction issues) and the challenge that high AI investments may continue to squeeze profit margins, the company’s core advertising business remains strong, and its advantages in user data and algorithmic distribution capabilities are continually being reinforced. Unlike the metaverse, current AI investments are directly feeding back into its mature advertising empire. Therefore, for patient, long-term investors, this pullback in 2026 may not be a “falling knife” but rather a long-awaited entry opportunity.
