We came across a bullish thesis on Meta Platforms, Inc. (META) on Substack by Sanjiv. In this article, we will summarize the bulls’ thesis on META. Meta Platforms, Inc. (META)’s share was trading at $673.70 as of Feb 26th. META’s trailing and forward P/E were 28.24 and 26.53 respectively according to Yahoo Finance.
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Meta delivered a stellar Q4 performance, exceeding expectations and reinforcing its dominance in digital advertising while making aggressive strides in AI. The company reported an EPS of $8.02, significantly surpassing the prior year’s $5.33 and beating analyst projections of $6.77. Revenue surged 20.6% year-over-year to $48.39 billion, reflecting Meta’s strong pricing power and expanding advertiser base. Net income reached an impressive $20.84 billion, demonstrating robust profitability and operational efficiency. These results coincided with the emergence of DeepSeek, a Chinese AI model that claims to rival leading U.S. models, raising questions about Meta’s AI strategy as it plans up to $65 billion in capital expenditures for AI infrastructure in 2025. While some investors worry about the scale of these investments, Meta’s cash flow from its core advertising business provides a financial buffer.
With Daily Active Users (DAU) up 5% to 3.35 billion, Meta’s unparalleled global reach remains a key asset, driving a 29% increase in average revenue per user. Operating margins expanded by 540 basis points, though partially due to one-time legal accrual reductions. Even so, the company’s core business remains exceptionally strong. However, heavy investment in AI and the metaverse continues to weigh on earnings, with Reality Labs posting a $5 billion loss in Q4. While its metaverse ambitions remain a long-term bet, AI has taken center stage, with Meta focusing on embedding AI into its products, making it an integral part of its feeds, ad systems, and broader ecosystem.
Meta sees 2024 as a defining year, with Mark Zuckerberg emphasizing the pivotal role AI will play in the company’s future. He expects Meta AI to reach over 1 billion users, positioning it as the leading AI assistant globally. The company is scaling its AI infrastructure aggressively, building a 2 GW AI data center while remaining one of Nvidia’s largest customers for AI chips. However, Meta is also developing its own silicon to optimize its ranking and recommendation systems by 2026. While Llama, Meta’s open-source AI model, is a key component of this strategy, some critics argue that Meta’s definition of open source lacks full transparency. Still, the upcoming Llama 4 model is expected to be competitive with closed-source AI models, featuring multimodal and agentic capabilities to enhance user engagement.
Beyond AI, Meta is betting on smart glasses as a major computing platform of the future. The Ray-Ban Meta AI glasses have been well received, with 2024 being a make-or-break year in determining whether they become a mainstream consumer product. Historically, third-generation consumer devices need to sell 5–10 million units to be considered a success, and Meta aims to hit this threshold to validate the smart glasses market.
Financially, Meta remains a powerhouse, generating a quarterly revenue run rate of approximately $46 billion, with substantial upside potential as platforms like WhatsApp remain under-monetized. Despite this strength, Meta continues to prioritize long-term investments over short-term profitability, a pattern evident in its aggressive spending on AI and the metaverse. Capital expenditures are set to soar from $37 billion in 2024 to an estimated $65 billion in 2025, reflecting the company’s conviction that AI will be a transformative revenue driver.
The competitive landscape for AI remains fierce, with Microsoft, Google, Amazon, and Oracle all investing heavily in the space. Unlike cloud providers that monetize AI through cloud-hosting services, Meta’s AI strategy is deeply tied to its advertising business. Enhancements in AI-driven ad targeting and engagement remain the company’s primary monetization avenue, though opportunities in Reality Labs, VR headsets, and AI-powered consumer devices may emerge over time. However, given AI’s rapidly evolving nature, the timeline for monetization remains uncertain.
Meta follows a proven playbook: build a compelling product, scale it to over a billion users, and then focus on monetization. While AI investments made in 2023 are expected to scale significantly in 2024, their financial impact will likely materialize beyond 2025. This long-term approach requires patience from investors, but Meta’s track record of building and scaling disruptive products suggests eventual success. By embedding AI into its core products and leveraging its unmatched user base, Meta is positioning itself to deliver a superior experience that competitors may struggle to replicate.
Investing in Meta stock is ultimately a bet on the company’s ability to translate its massive AI investments into sustained revenue and cash flow growth. While concerns over capital expenditures and competition persist, Meta’s leadership in social media, digital advertising, and AI-driven personalization provides a strong foundation for long-term success. If the company successfully executes its AI vision, the payoff could be substantial, making the current stock price an attractive entry point for investors willing to take a long-term perspective.
Meta Platforms, Inc. (META) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 262 hedge fund portfolios held META at the end of the third quarter which was 235 in the previous quarter. While we acknowledge the risk and potential of META as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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 was originally published at Insider Monkey.