We recently published a list of 10 Most Profitable Tech Stocks to Buy Now. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against other most profitable tech stocks to buy now.
Profitability remains one of the most sought-after traits in the technology sector, yet it is also one of the most complex. It is shaped by a delicate balance of investment cycles, competition, and market perception. While topline growth often takes center stage—driving valuations and attracting top talent—sustained profitability becomes crucial as industries mature, competition peaks, and new investments become necessary for survival. In this ever-evolving landscape, technology companies have mastered the art of balancing revenue expansion with profit growth by diversifying their businesses, building vast customer ecosystems, and continuously enhancing product experiences.
Looking ahead, earnings growth will take on an even greater role in determining valuations, particularly as the breakneck pace of growth begins to slow. Investors will increasingly focus on sustainable profitability rather than just rapid growth. In a January 2024 article, Rob Haworth, Senior Investment Strategy Director at U.S. Bank Asset Management, emphasized that technology companies possess strong earnings growth potential, largely independent of traditional business cycles. He explained:
“What is not clear yet is how companies investing in AI as a way to increase efficiencies or monetize services for end users will benefit from these advancements. We’re in a consolidation phase to figure out what revenue growth will be going forward. If AI helps boost productivity, that will support not only current rising stock valuations but individual prosperity as well.”
Franklin Templeton’s 2025 Technology Outlook echoes this sentiment, predicting another year of strong growth in the sector. The report notes that the “Magnificent Seven”—a group of leading tech giants—delivered exceptional earnings in 2024, outpacing both the broader market and the tech industry itself. While these companies are expected to maintain strong momentum, The firm anticipates that the rest of the sector may start catching up in 2025.
Tech investments are projected to grow exponentially in the coming years, reshaping the profitability landscape. Emerging technologies such as artificial intelligence, quantum computing, and autonomous systems present both immense opportunities and significant challenges. Some companies will achieve sustainable profit margins through strategic pricing and ecosystem advantages, while others will struggle under the weight of fierce competition and heavy reinvestment costs. For investors and stakeholders, understanding these shifting dynamics is key to navigating the ever-changing tech sector.
Our Methodology
To identify the 10 most profitable stocks, we conducted extensive research on U.S.-listed technology and tech-adjacent companies with a market capitalization of at least $2 billion. Rather than relying solely on absolute net income, we refined our selection criteria by focusing on companies with both an operating margin and net profit margin exceeding 20%. This approach ensures that high-margin firms are not overshadowed by larger corporations with higher overall earnings. After applying these filters, we ranked the stocks in ascending order based on their trailing twelve-month net income, with the company reporting the highest net income securing the top position.
Note: All pricing data is as of market close on February 14.
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Meta Platforms, Inc. (NASDAQ:META)
TTM Net Income: $62.4 billion
Number of hedge funds: 235
Meta Platforms, Inc. (NASDAQ:META) focuses on providing social media platforms and virtual reality services. The company operates platforms such as Facebook, Instagram, WhatsApp, Messenger, and Threads, and also sells wearables like Oculus headsets, aiming to connect people and build communities through its services. It generates nearly all its revenue from selling advertising placements on its family of apps (FoA) to marketers. It boasts a substantial user base, with an average Family daily active people (DAP) of around 3.35 billion. Meta Platforms, Inc. (NASDAQ:META) commands an operating margin of around 47% and net profit margin of 38%.
In late January 2025, Meta Platforms, Inc. (NASDAQ:META) reported robust Q4 2024 results, with sales surging 21% year-over-year (YoY) to $48.4 billion, driven by a 6% increase in ad volumes and a 14% rise in ad pricing. Net income surged by an impressive 50% YoY due to better operating leverage. The company plans to invest $60-65 billion in its generative AI efforts and improving core businesses, which should further position it for long-term growth.
In recent years, Meta Platforms, Inc. (NASDAQ:META) has been investing heavily in the development of the metaverse, a virtual environment where users can interact, work, and entertain themselves. The company is aggressively using AI to create new experiences that make its platforms more social, useful, and immersive, while also improving monetization. One of the company’s key focuses has been its pivot towards augmented reality (AR) and virtual reality (VR) technologies, which are greatly enhancing user experiences and are expected to drive future growth. With a strong user base and innovative advertising solutions, Meta Platforms, Inc. (NASDAQ:META) is well-positioned to capitalize on the growing demand for digital advertising and immersive experiences.
On January 31, UBS raised Meta Platforms, Inc. (NASDAQ:META) price target to $786 from $736 while reiterating a Buy rating. The analyst’s updated outlook highlights the company’s strong operational expenditure and first-quarter 2025 revenue guidance, positioning the tech giant to surpass top and bottom-line estimates throughout the year. His analysis suggests that the market may currently underestimate the company’s potential for accelerated ad revenue growth. This optimistic outlook is partly attributed to Meta Platforms, Inc. (NASDAQ:META) overcoming compute capacity constraints that previously hindered growth in 2024. He anticipates that new sources of revenue, including additional advertising revenue from Meta AI and the development of business AI-based chatbots, have yet to be fully factored into projections, positioning Meta Platforms, Inc. (NASDAQ:META) for a robust financial performance in the coming year.
Overall, META ranks 5th on our list of most profitable tech stocks to buy now. While we acknowledge the potential of META to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
