"Meta Platforms (NASDAQ: META) dropped sharply after its late-October earnings report, even though the social media and digital advertising giant posted another quarter of strong growth. Investors instead zeroed in on management's latest comments about capital spending, which paint a much heavier investment cycle than the market had been expecting. Meta's third-quarter revenue growth was impressive, powered by higher ad impressions and ad prices across its social media properties."
"Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. Massive capital expenditures don't change Meta's dominance in social media, but they do change how investors should think about its earnings power over the next several years. The scale of this build-out is large enough that it has become increasingly challenging to treat Meta as the asset-light compounder it once was."
Meta's advertising business continues to generate strong revenue growth driven by higher ad impressions and rising ad prices, and operating income expanded at a double-digit rate. Management raised the 2025 capital-expenditures outlook and outlined a 2026 spending plan that signals a much heavier investment cycle. Meta finished 2024 with $39.2 billion in capital expenditures, about 7% of $164.5 billion in revenue. Capital spending is expected to top $100 billion next year. The jump in capital intensity reduces certainty around future return profiles and challenges the characterization of Meta as an asset-light compounder.
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