Meta Platforms (NASDAQ: META)
Initiation of coverage · Internet and ads
Revenue grew 26%. Capex will be about 55% of revenue this year. At $610 a share, the price needs growth that does not slow down, or capex below its 2024 level.
The full 7-page research note
The quarter, the capital program, what the price assumes, the base case, the scenarios, the grids and the full disclosures. Free, with no email.
The call
We start coverage of Meta Platforms with a HOLD and a fair value of $540. That is 11.5% below the close of $610.15 on Friday, November 6, 2026. We rate a stock HOLD when our fair value is within 15% of the price.
In the twelve months to September 30, 2026, Meta spent $108.0 billion on capital expenditure (capex). That is 45% of revenue. In 2024, the figure was 24%. The 2026 guide of $135 billion to $145 billion is about 55% of the revenue that Meta expects this year.
The market value is $1.56 trillion. After we add the cash and deduct the debt and the legal accruals, the price puts $1.55 trillion on the operating business. For that, our model needs one of three results. These are revenue growth of 24.5% next year, an EBITDA margin of 48.8%, or capex below its 2024 share of revenue.
In our base case, revenue grows 21.6% next year, on the trend of Meta's own guide. The margin stays at 46.5%, and capex falls back to its 2024 share by year 6. That gives $540.43 a share, which we round to $540.
What the third quarter showed
Meta reported on October 21, 2026. Revenue grew 26% to $64.6 billion. Ad impressions grew 10%, and the average price per ad rose 14%. Daily active people were 3.64 billion on average in September, up 3%.
| Line | Q3 2025 | Q3 2026 | Change |
|---|---|---|---|
| Family of Apps revenue | 50,772 | 64,158 | +26.4% |
| Reality Labs revenue | 470 | 443 | -6% |
| Total revenue | 51,242 | 64,601 | +26.1% |
| Cost of revenue | 9,206 | 13,369 | +45% |
| Research and development | 15,144 | 20,054 | +32% |
| General and administrative, with the legal charge | 3,512 | 14,857 | |
| Operating income | 20,535 | 12,988 | -37% |
| Operating income without the legal charge | 20,535 | 22,878 | +11% |
| Reality Labs operating loss | (4,432) | (4,129) | |
| Depreciation and amortization | 4,963 | 7,154 | +44% |
| Capex, with finance lease principal | 19,374 | 34,906 | +80% |
| Free cash flow | 10,625 | (2,120) |
General and administrative costs include a charge of $9.89 billion for the August 2026 agreement with state attorneys general. The agreement allows payments of up to about $18.59 billion. Without the charge, operating income grew 11%, and the operating margin was 35.4%, against 40.1% a year earlier.
Costs grew faster than revenue. Cost of revenue grew 45%, and depreciation grew 44%. Capex grew 80%, so free cash flow was -$2.1 billion, the first quarter below zero in our data.
The stock fell 7.0% on October 22, and it is 12.5% below its close before the results.
The capital program
| Period | Capex | Revenue | Share of revenue | Free cash flow margin |
|---|---|---|---|---|
| 2024 | 39,225 | 164,501 | 23.8% | 31.7% |
| 2025 | 72,215 | 200,966 | 35.9% | 21.7% |
| Twelve months to September 30, 2026 | 107,961 | 241,606 | 44.7% | 10.4% |
| 2026, guide midpoints | 140,000 | 256,212 | 54.6% |
Meta raised the low end of the 2026 capex range three times. It was $115 billion to $135 billion in January. It is now $135 billion to $145 billion. The midpoint leaves $54.2 billion for the fourth quarter. Meta gave no figure for 2027, so we assume $180 billion.
Capex is not the full commitment. At September 30, Meta had $355.73 billion of leases that had not started, for data centers, energy, colocation and network. That is 3.3 times its capex of the last twelve months.
When an operating lease starts, its cost goes into operating expenses. When a finance lease starts, its principal payments go into the capex figure of Meta. So these leases will press on the margin or on capex, or on both.
Meta also had $454.52 billion of non-cancelable contractual commitments, with $121.41 billion due in 2027. It gave residual value guarantees of up to $41.49 billion to two data center ventures. Meta says that payments under these guarantees are not probable.
The program now uses outside money. Debt rose to $83.7 billion from $58.7 billion at the end of 2025, after $25 billion of notes in May. Meta bought back no stock in the first nine months of 2026. The share count rose 1.4% in a year.
What the price assumes
We value the operating business with a ten-year cash flow model and a 9% hurdle. Free cash flow is EBITDA, less tax on operating profit, less capex. Stock compensation stays in the costs, because it is a real cost to the holders.
Then we ask what one input must be for the model to give $610.15. We change one input at a time and keep the rest of the base case.
| Input | The price needs | For comparison |
|---|---|---|
| Revenue growth, year 1 | 24.5% | 21.6% on the trend; the fourth-quarter guide is 21.9% to 26.9% |
| EBITDA margin, every year | 48.8% | 46.5% in the third quarter; 48.7% in the last twelve months |
| Capex, share of revenue, from year 6 | 21.3% | 23.8% in 2024 |
| Hurdle rate | 8.5% | 9%, our choice |
Each line is possible, and that is why this is not a SELL. Growth of 24.5% next year is inside the range of the fourth-quarter guide. But it means that growth in 2027 does not slow from that guide. Growth has slowed in each quarter since the first quarter of 2026.
A margin of 48.8% is the level of the last twelve months. But the margin fell in the second and third quarters. The guide for the fourth quarter implies an operating margin of 33.0%, against 41.3% a year earlier.
A capex level of 21.3% from year 6 is below the 23.8% of 2024. With $356 billion of leases still to start, we do not assume a lower level than 2024.
Our base case
Revenue grew 33.1%, 28.0% and 26.1% in the first three quarters of 2026. The midpoint of the fourth-quarter guide is 24.4%. The rate fell by an average of 1.8 points in each of the last two steps.
We continue that step for three more quarters: 22.6%, 20.8% and 19.0%. Together with the fourth-quarter guide, that gives growth of 21.6% in year 1. The rate then falls in steps to 4% in year 10.
| Quarter | Revenue | EBITDA margin |
|---|---|---|
| Q1 2025 | 42,314 | 50.7% |
| Q2 2025 | 47,516 | 52.2% |
| Q3 2025 | 51,242 | 49.8% |
| Q4 2025 | 59,893 | 50.3% |
| Q1 2026 | 56,311 | 51.3% |
| Q2 2026 | 60,801 | 47.2% |
| Q3 2026 | 64,601 | 46.5% |
The EBITDA margin stays at 46.5%, the level of the third quarter without the legal charge. It includes the loss of Reality Labs, which was $18.8 billion in the last twelve months. Meta expects that loss to be about $15 billion in 2027.
Capex is $189 billion in year 1 and 50% of revenue in year 2. It then falls in steps to 23.8% by year 6, the share of 2024.
| Year | Revenue | Capex | Share | Depreciation | Free cash flow |
|---|---|---|---|---|---|
| Year 1 | 293,894 | 189,176 | 64% | 44,381 | (68,231) |
| Year 2 | 351,737 | 175,869 | 50% | 70,032 | (28,244) |
| Year 3 | 414,070 | 179,960 | 43% | 94,915 | (4,054) |
| Year 5 | 545,485 | 165,738 | 30% | 143,681 | 69,165 |
| Year 6 | 610,075 | 145,471 | 24% | 164,846 | 117,952 |
| Year 10 | 797,231 | 190,098 | 24% | 168,314 | 146,130 |
Free cash flow is below zero for three years, a total of -$100.5 billion. By year 10, it is 18.3% of revenue. The value after year 10 is 77% of the total, so the long-run level of capex is the main question.
The balance sheet outside the business
| Item | $ millions |
|---|---|
| Cash, cash equivalents and marketable securities | 82,449 |
| Non-marketable equity securities, at their carrying value | 32,624 |
| Less debt, current and long-term | (83,669) |
| Less legal accruals, current and non-current | (19,881) |
| Total | 11,523 |
| Per share | $4.51 |
We deduct the legal accruals because they are cash that Meta will pay. They rose to $19.9 billion from $7.3 billion at the end of 2025. We do not deduct the operating lease liabilities of $31.2 billion, because their cost is already in the EBITDA margin.
Together, these items add only $4.51 a share. On operating income after tax, without the one-time charges, the price is 20.2 times earnings.
Valuation
| Case | Inputs | Revenue, year 10 | Free cash flow margin, year 10 | Value | Return |
|---|---|---|---|---|---|
| Bull | Growth 25.6% to 5%; margin 50.5%; capex 18.0% | $989 billion | 26.6% | $1,009 | +65.4% |
| Base | Growth 21.6% to 4%; margin 46.5%; capex 23.8% | $797 billion | 18.3% | $540 | -11.4% |
| Bear | Growth 15.6% to 3%; margin 40.5%; capex 29.9% | $585 billion | 8.3% | $139 | -77.3% |
The bull case needs growth that starts at 25.6%, a margin four points higher and capex at 18% of revenue. It gives $1,009, which is +65.4%. The bear case keeps capex midway between 2024 and 2025. It gives $139, which is -77.3%.
| Hurdle | 2.5% growth | 3.0% | 3.5% |
|---|---|---|---|
| 8.0% | $630 | $682 | $746 |
| 8.5% | $563 | $605 | $654 |
| 9.0% | $507 | $540 | $580 |
| 9.5% | $459 | $486 | $519 |
| 10.0% | $417 | $440 | $467 |
From an 8% to a 10% hurdle, the grid goes from $417 to $746. The price is reached only at an 8% hurdle, or at 8.5% with 3.5% growth after year 10.
| EBITDA margin | 18.0% capex | 20.0% | 23.8% | 30.0% |
|---|---|---|---|---|
| 40.0% | $511 | $455 | $348 | $176 |
| 43.0% | $600 | $544 | $437 | $265 |
| 46.5% (Q3) | $704 | $648 | $540 | $368 |
| 48.7% (12 months) | $771 | $715 | $607 | $435 |
| 52.0% | $867 | $811 | $704 | $532 |
Capex from year 6 matters most. Capex of 20% of revenue in place of 23.8% adds about $107 a share. Our assumption for 2027 capex matters less: each $30 billion moves the value by about $7.00 a share.
Why this is a HOLD
Our central value is 11.5% below the price. That is inside our band of 15%. The bear case is 77% below, and the bull case is 65% above, so the risk leans down.
We do not say that the capex is a mistake. Ad prices and ad volume both grew, and Meta says that better ad performance drove the higher prices. We say that the price already pays for a good result.
The dividend is $0.525 a quarter, a yield of 0.34%. There are no buybacks to support the price.
Risks, and what would change our mind
- Growth does not slow. If 2027 grows as fast as the fourth-quarter guide, the base case gives about the price. Growth above that gives more.
- Reality Labs. Meta expects the loss to fall to about $15 billion in 2027, from $18 billion to $19 billion in 2026. A smaller loss adds to the margin.
- Legal costs. Legal accruals are $19.9 billion. Meta says that more youth trials will start soon in the United States.
- The leases. $356 billion of leases have not started. Their cost can lower the margin more than our base case shows.
- Downgrade to SELL if the price goes above about $635. At that price, our fair value is 15% below the price. Upgrade to BUY if the price falls below about $470, or if capex falls as a share of revenue while growth stays above 20%.
Related research
Reports that bear on this one. Every call on this site is dated, public and scored the same way.
- Alphabet, where we asked the same question about a larger capital program. We rated it SELL.
- Taiwan Semiconductor, the supplier side of the same programs, which we rated BUY.
The field guide defines reverse DCF and free cash flow. The full list of calls is on the scoreboard.
Methodology, sources & disclosures
Methodology
A model script computes every figure in this report. It checks that the segments add to reported revenue and operating income in each quarter. It also checks that the quarters add to the nine-month and full-year totals.
It checks that free cash flow in each quarter matches the figure that Meta reports, and that the market value agrees with public figures. Year 1 revenue in the base case must equal the trend that the text describes.
The model uses a 9% hurdle and 3% growth after year 10. The tax rate is 17%, the rate of the third quarter without the charge. Depreciation uses a 6-year life, and it changes only the tax.
We take out the legal charges of $2.40 billion and $9.89 billion and the severance of $1.18 billion from the margin. We ignore changes in working capital, interest income and future share issues. The share count is 2,556.2 million, from the cover of the Form 10-Q.
The reference price
The $610.15 reference price is the close of META on Friday, November 6, 2026. Five sources state $610.15: stockanalysis.com, fool.com, marketscreener.com, chartexchange.com and tradingeconomics.com.
Stockanalysis and ChartExchange show the prior close of $605.08, and that close plus $5.07 is $610.15. We rejected old pages, a page that showed a price during the day, and pages that showed the last trade of the hour, $610.10.
Primary sources
- Third quarter 2026 earnings release, October 21, 2026. Source for revenue, segments, costs, the legal charge, cash flow, the balance sheet and the guide.
- Form 10-Q for the quarter ended September 30, 2026, for the share count, the liabilities, legal accruals, leases, commitments and the ventures.
- Second quarter 2026 earnings release, for the quarter, the legal charge and the severance.
- First quarter 2026 earnings release, for the quarter and the April capex range.
- Fourth quarter 2025 earnings release, for the fourth quarter of 2025, the full years 2024 and 2025, and the first 2026 capex range.
- Form 10-Q for the quarter ended September 30, 2025, for the share count a year earlier.
- Dividend release of September 10, 2026, for the dividend of $0.525 a share.
Other sources
- Third quarter 2026 earnings call transcript, for the capex range and the comment on 2027.
- Stockanalysis, price history, for the closes of October 21, October 22, November 5 and November 6.
- Motley Fool, November 6, 2026, for the close and the market value.
Disclosure
The author holds no position in META and has no plans to start one within 72 hours of publication. This report is opinion for education. It is not investment advice.
2 Comma Investor is not a registered investment adviser or broker-dealer. If a correction is necessary, we will publish it on this page with a date.
This call joins the scoreboard as an open position at $610.15. We will score it against the S&P 500 on November 7, 2027, under the same rules as every other call.