Despite Meta Platforms (META) delivering strong results in its latest quarterly report, its stock price fell after the earnings release. The market expressed concerns over the company’s rising capital expenditures on artificial intelligence and a slight sequential decline in daily active users. However, analysts believe that the social media giant’s current valuation has become attractive.
Meta Platforms’ first-quarter 2026 earnings report showed revenue of $56.3 billion, a 33% year-over-year increase, primarily driven by continued growth in its online advertising business. Compared to Google’s $77.3 billion in ad revenue for the same period, Meta is narrowing the gap in the online advertising space and is growing at a faster rate than Alphabet.
Although AI-related capital expenditures exceeded expectations, sparking dissatisfaction among some investors, Meta still achieved a 61% year-over-year increase in net income. The market’s harsh judgment of the company due to rising AI spending seems unfair, as its profits and profit margins are moving in the right direction.
Investors also expressed concern over a slight sequential decline in daily active users, though the figure still grew 4% year-over-year. Meta explained that the internet outage in Iran and restrictions on WhatsApp access in Russia contributed to this small decrease.
Meta Platforms set the midpoint of its second-quarter 2026 revenue guidance at $59.5 billion, implying a 25.2% year-over-year increase. This growth rate is higher than Alphabet’s typical quarterly performance, indicating the company is still gaining market share in online advertising.
Over the past three years, Meta Platforms has maintained an annualized revenue growth rate of 19.9%. This foundation, combined with the push from AI technology, has contributed to the recent acceleration in growth, which is expected to continue into the second quarter.
Meta Platforms still relies heavily on online advertising revenue, whereas Alphabet has successfully expanded into businesses such as Google Cloud, Gemini, and Waymo. However, Meta is also beginning its own diversification efforts, which do not yet appear to be fully priced in by the market.
CEO Mark Zuckerberg highlighted the company’s release of its first AI model from Meta Superintelligence Labs and its commitment to bringing personal superintelligence to “billions of people.” Meta has ample capital and profits to invest in AI models until these services become profitable.
Meta Platforms delivered an impressive earnings report in the first quarter, with 33% revenue growth and 61% net income growth, but market concerns over AI capital expenditures and user data led to a stock price pullback. Although business diversification is still in its early stages, the positive impact of AI on the advertising business is already evident, and the second-quarter revenue guidance suggests the growth momentum is likely to continue. For investors seeking a combination of high growth and reasonable valuation, Meta Platforms currently presents a relatively rare opportunity.
The stock’s current forward price-to-earnings ratio is less than 19 times, below the S&P 500’s 21.9 times. Considering its revenue growth rate of over 30%, which is much higher than the market average, this valuation appears particularly cheap.
