Why Is Meta Platforms Priced 36% Cheaper Than Its Hyperscaler Peers?

"Over the last 12 months, revenue growth hit 21.3%, far exceeding the low- to mid-teens rates for the others, such as with Alphabet at 13.4% and Amazon below that. And in the past three years, in the midst of the artificial intelligence (AI) boom, Meta Platforms' stock rose over 368%, while Microsoft gained 95% and Apple, 91%. Yet META trades at a P/E of about 21x, roughly 36% below all of the other major hyperscalers, which average around 33x earnings."

"Success for the owner of Facebook, Instagram, and WhatsApp hinges almost exclusively on advertising, which made up 97.7% of third-quarter revenues, exposing it to economic cycles that can swing demand sharply. Although Alphabet is also very dependent upon advertising, Google Cloud contributes around 15% total revenue, giving it greater diversification. Similarly, Amazon offers e-commerce and cloud services, while Microsoft gets revenue from software and the cloud. Apple's primary segment is consumer electronics, but its services division remains its fastest-growing unit."

"And where all hyperscalers are ramping up data center investments, with a collective $600 billion expected to be spent this year between Meta, Alphabet, Amazon, and Microsoft, Meta's $70 billion to $72 billion 2025 capex tab - set to grow notably in 2026 to over $100 billion - is focused internally on AI, without external revenue streams like its peers' cloud services. This limits its monetization potential, pressuring free cash flow, which is projected to drop 53% in 2026."

Meta Platforms achieved 21.3% revenue growth over the last 12 months and more than 368% stock appreciation over three years amid the AI boom, outperforming peers. The company trades at about 21x P/E, roughly 36% below other major hyperscalers averaging around 33x. Advertising comprised 97.7% of third-quarter revenues, leaving Meta highly exposed to economic cycles and lacking diversification from cloud or product services that peers have. Meta plans large AI-focused capital expenditures of $70–72 billion in 2025 and over $100 billion in 2026, which limits external monetization, pressures free cash flow (projected to drop 53% in 2026), and increases earnings volatility. CEO Mark Zuckerberg's bold spending bets further weigh on valuation.

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