Meta $145 Billion AI Bet Was Supposed to Be the Risk. Now It’s Starting to Look Like a Business

Key Stats for Meta Stock

• Current Price: $646.01
• Target Price (Mid): ~$1,320
• Street Target: ~$823
• Potential Total Return: ~105% (over ~4.4 years)
• Annualized IRR: ~17% / year
• Max Drawdown: 33.45% (3/27/26)

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What Happened?

Meta Platforms (META) spent most of this year being punished for its ambition. Ad revenue grew in the low thirties quarter after quarter, and the conversation kept snapping back to one number: the tens of billions the company was pouring into data centers with no clear return date. By early April, the stock had fallen 27% from its August 2025 peak. The bear case was simple, and it was working.

Then, in July, the question was inverted. On July 1, Meta confirmed it is building a cloud business, internally called Meta Compute, to sell its surplus computing capacity to outside customers. Shares jumped roughly 9% that session while neocloud providers CoreWeave and Nebius each fell more than 10%, a sign the market was repricing who owns the compute. The stock went on to post its best week since early 2024, helped along by new Muse AI model launches, then on July 17, the New York Times reported that Anthropic, the AI lab behind Claude, is in early talks to lease computing power from Meta in an arrangement that could reach $10 billion over two years. The compute Meta was criticized for buying is starting to look like something it can rent out.

That does not settle the debate. It moves it. The spending is real, the cloud revenue is still $0 on the books today, and the flashiest catalyst is an early-stage report rather than a signed contract. But the terms of the argument have shifted, and Meta’s July 29 earnings report is where the market learns whether the shift holds.

The Compute Meta Was Buying Now Has a Market

For two years, Meta was one of the largest buyers of AI infrastructure on the planet, signing supply contracts reportedly worth around $35 billion with CoreWeave and up to $27 billion with Nebius. The market understood Meta as a customer. Meta Compute inverts that role, and the reported Anthropic talks give the inversion a name and a number.

It is worth being precise about what the Anthropic report is. Anthropic pitched the arrangement in June; it would let the lab rent Meta’s infrastructure rather than build its own, and both companies declined to comment. It is a reported early-stage negotiation, not a signed deal; either side could exit early, and it may not close. At roughly a third the size of the $45 billion compute deal Anthropic struck with SpaceX in May, it is also modest by industry standards. But even as a signal, it validates a thesis the market had assigned almost no value to: that Meta’s spare capacity has outside buyers, and that Meta can earn revenue from infrastructure the way it has long earned it from attention.

Management had been laying the groundwork for months. At Meta’s May shareholder meeting, CEO Mark Zuckerberg said entering cloud computing was “definitely on the table,” noting that firms were approaching Meta “almost every week” to buy access to its models or spare compute. On the Q1 call, CFO Susan Li said the company has “continued to underestimate our compute needs even as we have been ramping capacity significantly.” A company that keeps underestimating its own demand is not one sitting on idle capacity, which is exactly why the market wants to know how much surplus there really is to sell.

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Why the Capex Number Stopped Being Just a Liability

The spending that scared everyone is still enormous. On the Q1 call, Li raised full-year capital expenditure guidance to $125 billion to $145 billion, up from $115 billion to $135 billion, attributing the increase mainly to higher component and memory pricing rather than a bigger build. For most of 2026, the market read that number one way: as cash leaving the business with no return in sight.

The July news reframes it. If excess capacity can be sold, the buildout is not only a cost center but a potential asset base. That reframe has limits worth stating: the $107 billion step-up in contractual commitments Li disclosed this quarter represents obligations to buy compute, not surplus Meta can immediately resell, and the two pools are not the same. Still, the direction is what matters to the multiple. Meta’s forward two-year revenue CAGR sits at around 23%, driven almost entirely by advertising today. A credible second revenue engine, the market has barely priced, is the kind of thing that re-rates a stock before it ever reaches the income statement. 

The Ad Engine Funding All of It Is Still Formidable

None of this works without the business underwriting it, and that business remains strong. Q1 2026 revenue reached $56.3 billion, up 33% year-over-year, with operating income of $22.9 billion for a 41% operating margin. Ad impressions grew 19% while average price per ad rose 12%, showing both more inventory and better monetization of it.

One number needs a caveat. Reported GAAP earnings of $10.44 per share included an $8.03 billion one-time tax benefit; absent it, EPS would have been $7.31. Readers sizing up the quarter should anchor on $7.31. The genuinely strong signal was operational: AI ranking changes lifted Instagram Reels time spent 10%, and the value optimization suite reached an annual revenue run rate above $20 billion, more than doubling year-over-year.

The stock is not obviously cheap, which is the tension. Meta trades at around 20 times NTM earnings, below Alphabet’s roughly 27 times on the same forward basis but above social peers like Pinterest at about 12 times and Match at under 10 times. That premium is defensible only if the operating margin holds as capex peaks, and that single assumption is what the whole case rests on.

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TIKR Advanced Model Analysis

• Current Price: $646.01
• Target Price (Mid): ~$1,320
• Potential Total Return: ~105%
• Annualized IRR: ~17% / year

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The TIKR Valuation Model, using the mid-case scenario realized at the end of 2030, points to a target of around $1,320 per share, implying roughly 105% total return and an annualized IRR near 17% over the next 4.4 years. The mid case is the right anchor because the range is wide but never poor: the low case still returns about 12% a year, and the high case reaches roughly 20%.

Two drivers carry the revenue forecast. The first is continued ad growth, with the mid-case forward revenue CAGR around 17% as AI-driven ranking and monetization compound across Facebook, Instagram, and newer surfaces like Threads and WhatsApp. The second is the compute-selling optionality that the model does not fully price, and that July’s news makes more credible. The margin driver is net income margin, holding around 32% in the mid case, even as depreciation from the buildout weighs on reported profit.

The upside is that Meta turns its infrastructure lead into a durable second business while the ad engine funds it. The downside is that the compute revenue never scales, and the market is left paying a premium for a business spending $145 billion a year on capacity it cannot fully monetize.

Conclusion

July 29 is the near-term test, and the bar is specific. Q2 revenue guidance was set at $58 billion to $61 billion; a print inside or above it keeps the ad engine’s credibility intact. What matters more is the capex commentary. If management raises the 2026 range again with no concrete compute-revenue signal, the old fear returns fast. If it can instead point to Meta Compute traction or a closed Anthropic deal, the reframing survives, and the model’s upside gets more believable. Watch the capex line first, revenue second. That order tells which story the market is trading.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!