Big tech stocks have stayed afloat after last year’s surge, especially as companies invest billions in artificial intelligence and data centers. Meta Platforms (META), Facebook’s parent company, has felt the pressure. Advertising revenue growth is cooling from its pandemic peak and Meta is increasing spending on AI “superintelligence.” In that context, the latest shock came when Meta confirmed that it will eliminate “several hundred” jobs in units such as sales, recruiting and its Reality Labs VR arm. The company is also under increasing legal pressure from regulators.
The question now for investors is whether, with AI (and legal) costs rising and layoffs announced, META stock looks like a buy, sell or hold option. Let’s try to find out.
Meta Platforms is one of the largest social media and advertising technology companies in the world. It has 3.6 billion daily users and generates almost all of its revenue from the App Family segment. Its Reality Labs unit, VR/AR headsets, etc., is small in terms of revenue, about 1% of the total, but has racked up massive losses. CEO Mark Zuckerberg is now shifting his focus to AI, even as he seeks efficiencies in the core business.
Meta recently delayed the launch of its next big AI model, “Avocado,” after internal testing lagged behind Google (GOOG) (GOOGL)’s best models. Meta reiterated that it is on a “rapid trajectory” toward better models and said more will be rolled out steadily. The company also acquired an AI wearable startup, Limitless, to advance its vision of “personal superintelligence.”
For now, Meta is following the new EU rules, allowing users to choose fewer personalized ads and addressing AI chat concerns. Use AI internally while also meeting public releases.
META stock rallied thanks to some earlier headlines, such as AI progress and gains over the past year, which were not enough to sustain these gains into 2026; it is now down approximately 20% year to date (YTD). The pullback indicates investor concern over slowing advertising trends and heavy spending on artificial intelligence and the metaverse.
From a valuation perspective, META remains highly priced as its Forward P/E is around 21x, well above its typical tech and media peers of 13x, and its EV/EBITDA is 15x versus an industry average of around 11x. It means the stock is trading at a premium due to expectations of strong future growth and profits.
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On March 25, it emerged that Meta was cutting “a few hundred” jobs. The layoffs spanned Reality Labs, sales, recruiting and other teams. Meta framed this as a routine restructuring; A company spokesperson said teams “are periodically restructured” and that affected staff would be given “other opportunities” within the company. In fact, with 79,000 employees in total, the cuts represent a small fraction of Meta’s workforce.
Looking ahead, analysts point out that the main impact will be on expenses; Cutting a few hundred jobs may save tens of millions, but the real story for Meta is the huge spending on AI and advertising growth. For now, the market appears to be focused on revenue trends and investment performance rather than this modest layoff.
Meta’s last quarter showed accelerated growth but high spending. Revenue increased 24% year-over-year (YoY) to $59.89 billion, driven by more ads on Facebook and Instagram, as daily active users increased about 7% YoY. Operating income rose just 6% to $24.75 billion as expenses rose 40% to $35.15 billion on data center construction and research and development. Net income was $22.77 billion, up 9%, and diluted earnings per share were $8.88, up 11% from a year ago, both beating Wall Street targets.
Meta also remains a source of income. Free cash flow for the quarter was approximately $14.1 billion and it ended 2025 with approximately $81.6 billion in cash and marketable securities. Chief Financial Officer Susan Li said this cash reserve allows Meta to fund its AI ambitions. Mark Zuckerberg summed it up by saying that the company had strong commercial performance in 2025 and now hopes to advance personal superintelligence in 2026.
In practice, almost all of Meta’s revenue still comes from the App Family. For example, in fiscal 2025, that segment generated about $198.8 billion, or 98.9% of total sales, a year-over-year increase of about 22%, while Reality Labs’ revenue was about $2.2 billion. Reality Labs’ losses continued and Meta said 2026 may be the peak year for those losses.
Management also provided optimistic guidance despite heavy spending. For the first quarter of 2026, Meta expects revenue of between $53.5 billion and $56.5 billion, helped by a currency tailwind of around 4%. For fiscal 2026, the company is budgeting between $162 billion and $169 billion in total expenses, with much higher capital expenses of up to $135 billion. Even with the increased spending, Meta expects operating income to exceed 2025 levels.
Analysts are generally bullish on META stock, but with different price targets. Bank of America remains a prominent bull, with a new target set at $885 from $810 and a “Buy” rating. According to BofA analyst Justin Post, Meta has strong revenue growth of 21% with gross margins of 82%, writing that it is an infrastructure powerhouse that should be able to generate positive free cash flows in 2026.
RBC Capital also maintained an “outperform” on META with a target of $810. According to RBC, Meta outperformed the fourth quarter and was up 10% higher than consensus, and Reality Labs’ losses had reached an all-time high.
Goldman Sachs was also encouraging: Goldman analyst Eric Sheridan maintained a “Buy” rating but slightly raised his target to $835 supported by growing hype momentum. On the cautious side, Morgan Stanley, which had lowered its target to $750 in December, admitted that Meta had good fundamentals. MS noted that sentiment was apprehensive as Spending’s higher P/E had stabilized at near-long-term levels, but sees Meta’s advantage in data, distribution and artificial intelligence as a strength.
Overall, Wall Street’s consensus target is around $864, suggesting a bullish premium of nearly 63%. According bar diagramOf 56 analysts surveyed, the majority rate META a “strong buy.”
On the one hand, the debate is obvious because bulls claim that the additional earnings from advertising and investment in AI by Meta are worth the premium, but bears fear that the high valuation is due to high expectations.
Meanwhile, Meta provided a plan to increase revenue and record cash, but at a higher cost. I think the stock could rebound if its investments in AI translate into real productivity gains and returns without hurting overall profitability.
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On the date of publication, Nauman Khan had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
