Meta’s Stock Hinges on Spending Forecast

All eyes are on Meta Platforms as it prepares to report quarterly earnings, with investor anxiety squarely focused on the company's future spending plans. Following a significant stock decline last quarter, CEO Mark Zuckerberg faces pressure to demonstrate that massive investments in artificial intelligence and the metaverse remain financially sustainable.

Beyond the financial figures, the company continues to navigate legal challenges, including lawsuits related to patent infringement and antitrust proceedings. Concurrently, Meta is developing new AI models, internally codenamed "Avocado" and "Mango," in a bid to strengthen its technological edge.

Core Business Performance Shows Strength

Market expectations for the core advertising business are high. For the fourth quarter of 2025, experts project revenue growth of approximately 21 percent, reaching between $58.3 and $58.5 billion. Earnings per share are also anticipated to rise, with forecasts exceeding $8.16. Analysts at Bank of America express even greater optimism, suggesting potential for a positive revenue surprise.

This confidence appears priced into the equity already. Meta's shares have advanced more than 9 percent over the past seven trading sessions, recovering notably from recent lows as the market anticipates robust operational performance.

Should investors sell immediately? Or is it worth buying Meta?

The Multi-Billion Dollar Dilemma

The true test, however, will be the outlook for 2026. The pivotal issue for the stock's trajectory is the forecast for capital expenditures (CapEx). Analysts at Bank of America are concerned that these investments could climb as high as $113 billion—a substantial 58 percent year-over-year increase.

This creates a central conflict for investors. Should spending growth remain moderate, around 30 percent, markets are likely to react with relief. An increase surpassing 35 percent, however, could reignite shareholder concerns. The stock sold off sharply following third-quarter results precisely because cost projections threatened to overwhelm profits.

Analysts Identify a Buying Opportunity

Despite spending worries, Meta has influential supporters. Rothschild & Co Redburn upgraded the stock to "Buy" just this Monday, raising its price target to $900. Their analyst called Meta's AI-powered advertising engine "unrivaled." Furthermore, the valuation appears attractive: trading at an expected price-to-earnings (P/E) ratio of about 22 to 23, Meta is priced more favorably than many of its technology giant peers.

The direction will be set after today's market close. During the subsequent conference call, the critical factor for the share price's future path will be management's ability to convincingly argue that soaring expenditures are in a healthy balance with future profit opportunities.