Meta raises AI capex to $145 billion as ad growth accelerates
Meta's 33% revenue surge shows AI is paying off, but a $145 billion spending ceiling will test investor patience.
Meta Platforms has raised its full-year 2026 capital expenditure guidance to a range of $125 billion to $145 billion, underlining the sheer scale of its bet on artificial intelligence infrastructure.
The spending plan, detailed alongside a first-quarter earnings report that comfortably beat expectations, initially spooked investors. Shares dropped to $608.75 the day after results were published before recovering to $681.31. The stock remains 4% below its 52-week high of $793.65.
The selloff reflected a familiar tension in AI-related stocks: Meta is being valued as a growth company but spending like an infrastructure utility. First-quarter capex alone surged 47% to $19 billion.
Earnings justify the outlay, so far
The underlying business, however, is delivering. First-quarter revenue of $56.31 billion represented 33% year-on-year growth, driven by a 19% increase in ad impressions and a 12% rise in average price per ad. Earnings per share of $10.44 crushed the consensus estimate of $6.66.
Chief Financial Officer Susan Li pointed to a 10% lift in time spent on Instagram Reels following ranking upgrades, evidence that AI is improving the core product. Business AI conversations have scaled to more than 10 million per week, up from 1 million at the start of the year. Family daily active people across Meta's apps reached 3.56 billion.
The question for investors is whether that momentum can absorb the capital drain. At 21 times forward earnings, Meta trades at a reasonable multiple relative to peers, particularly given its ad revenue growth rate. Alphabet's capital spending plan of up to $185 billion is larger in absolute terms, but Meta's growth profile is notably stronger.
Analysts remain firmly bullish
The consensus on Wall Street is unambiguous: 57 analysts carry buy ratings on the stock with zero sells. One model from 24/7 Wall St. sets a price target of $903.93, implying roughly 33% upside from the current price.
That target will only be reachable if Meta continues to demonstrate that AI compute translates directly into advertising revenue. The tenfold increase in business AI conversations this year is an early indicator, but converting those interactions into meaningful revenue streams remains the critical challenge.
For now, the numbers suggest Meta is pulling off a difficult balancing act—funding a massive infrastructure buildout while still growing the bottom line at a pace that justifies a growth premium. The stock's muted performance over the past year, down nearly 4%, indicates the market wants more proof before fully rewarding the strategy.
