Meta stock surges 15% on confirmed cloud computing push
Meta Platforms is developing a cloud service called Meta Compute, driving its shares to their best week in over two years as investors weigh a new revenue stream against established rivals.
Meta Platforms is entering the cloud computing market with a new service called Meta Compute. The company confirmed the initiative is under development, marking a strategic shift to monetize its existing technological infrastructure. While Meta warned that plans could still change, the confirmation alone was enough to alter Wall Street's perception of the social media giant.
Chief Executive Mark Zuckerberg signaled the move in May, telling shareholders that selling computing access was "definitely on the table." He noted frequent external requests, stating, "Almost every week there are different companies that come to us from the outside asking us to both stand up an API service or asking if we have compute that they could buy from us at some premium to what we've bought it at." Zuckerberg further validated the strategy on July 9, stating in an interview that the concept "makes sense."
Market reaction and competitive landscape
Investors responded with immediate enthusiasm, pushing the stock up 21% to $677 since an initial July 1 report. The shares posted a 15% gain last week alone, marking the stock's best weekly performance since early 2024. The rally reflects a belief that Meta possesses the underlying resources and corporate relationships necessary to generate meaningful revenue in a booming sector.
The move pits Meta directly against "Magnificent Seven" rivals Amazon, Microsoft, and Alphabet. Exact operational details remain sparse, but unconfirmed reports suggest the company is weighing two primary models. Meta could charge developers to access AI models hosted on its infrastructure, or it could sell excess computing capacity similar to traditional cloud providers.
Earnings outlook and valuation
With the strategy still in its formative stages, the July 29 earnings report will serve as a critical milestone for investors seeking concrete details. Until then, the market appears willing to give Meta the benefit of the doubt regarding its cloud ambitions.
Despite the recent surge, consensus expectations imply further upside. With 91% of analysts maintaining a buy rating, the median price target sits at $810, suggesting roughly 20% upside from current levels. The stock continues to trade at a discount to the broader market, valued at 24 times earnings and 21 times forward earnings, below the S&P 500 average. This relatively cheap valuation provides a buffer as the company embarks on its cloud computing expansion.
