Meta Platforms (META) has spent years pouring tens of billions of dollars into artificial intelligence (AI). Investors have largely accepted those investments because advertising profits have remained exceptionally strong, but one question has lingered over the stock: When will Meta actually make money from its AI infrastructure?
That question is becoming much more important after reports surfaced that Anthropic is discussing a compute-leasing agreement with Meta that could be worth as much as $10 billion over two years. If completed, the arrangement would represent one of the first major examples of Meta generating direct revenue from the massive AI data centers it has been building.
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Meta will report its second-quarter earnings on July 29. As always, investors will likely be looking for signs that the company's enormous AI investments are beginning to create entirely new revenue streams rather than simply supporting its advertising business.
Meta Platforms Stock Still Looks Reasonably Valued
Despite the rebound in July, Meta Platforms' valuation remains relatively reasonable compared with many AI leaders.
META stock currently trades at roughly 21 times trailing earnings and about 21.4 times forward earnings, below its five-year average multiple of around 26 times. Meta also carries a PEG ratio near 1.07 times, suggesting expected earnings growth largely offsets its current valuation.
After falling roughly 15% during the first half of the year, Meta has recovered sharply. Shares are now down 8% year-to-date (YTD) after rallying this month, with investors embracing the company's evolving AI strategy.
If Meta succeeds in generating recurring revenue from AI infrastructure, today's valuation could prove more attractive than it initially appears.
www.barchart.com Meta's AI Investments Are Starting to Change the Narrative
Investors have spent much of the year questioning Meta's aggressive spending plans.
Management expects to spend between $125 billion and $145 billion in capital expenditures during 2026, almost double the roughly $72 billion invested last year. That level of spending initially pressured META stock as investors wondered whether returns would justify the enormous investment.
The picture has started to improve. Bloomberg reported earlier this month that Meta is developing Meta Compute, a cloud computing platform that would rent AI infrastructure to outside customers. The report immediately changed investor sentiment because it suggested Meta could eventually compete with the likes of Amazon's (AMZN) AWS, Microsoft (MSFT) Azure and Alphabet's (GOOGL) Google Cloud rather than remaining solely an advertising company.
News that Anthropic may lease computing capacity from Meta reinforces that strategy. Instead of viewing AI infrastructure purely as a cost, investors are beginning to see it as a potential long-term revenue generator.
Meta's Business Continues Delivering Strong Results
While attention has shifted toward AI monetization, Meta's core business continues to produce impressive financial results.
During the first quarter, Meta reported EPS of $10.57, comfortably ahead of analysts' expectations of $6.65. Revenue climbed 33% year-over-year (YOY) to $56.3 billion, also exceeding Wall Street forecasts. The company has now beaten consensus earnings estimates in each of the past four quarters.
Wall Street expects another solid report on July 29, forecasting revenue of approximately $60.2 billion and earnings of $7.13 per share. Bank of America is even more optimistic, projecting $60.6 billion in revenue and EPS of $7.50, driven by healthy advertising demand and AI-powered improvements across platforms.
Beyond earnings, investors will likely focus on updates regarding Meta Compute, AI infrastructure monetization, and any changes to management's capital spending outlook.
Wall Street Remains Bullish on Meta Platforms Stock
Analysts remain optimistic about Meta's long-term outlook. Based on 54 analysts with coverage, META stock carries a consensus “Strong Buy” rating. The average price target of $824.29 suggests potential upside of about 36% from current levels.
Meta was recently called one of the strongest beneficiaries of AI spending by Goldman Sachs. The firm has a “Buy” rating on META stock with an $830 price target. Analysts at Morgan Stanley also have an “Overweight” rating with a target price of $775, believing that worries about AI investing returns have already been priced into shares.
Bank of America is still among the largest bulls with an $835 price target, keeping a “Buy” rating for the stock. The firm suggests that investors still don't appreciate the long-term worth of Meta's growing AI systems, and that compute leasing and other prospects might come and slowly change the valuation of the firm.
The proposed Anthropic agreement is still in talks and may not be realized if it misses approval in the near future. However, if Meta eventually transforms its AI infrastructure into a valuable cloud company, investors will look at it differently. Meta Platforms could eventually be seen as one of the world's biggest AI infrastructure companies rather than just a social media giant.
www.barchart..com On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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