Meta Platforms (META) is going much bigger in Louisiana. Earlier this week, the company announced that its Hyperion data center in Richland Parish will expand to 5 gigawatts of compute capacity, up from the earlier plan for 2 GW. The total investment in the project has now crossed $50 billion. Hyperion is where Meta trains its largest AI models, and construction has been running since December 2024.
What makes the announcement particularly interesting is its timing. Less than two weeks ago, Meta was reportedly setting up a cloud unit to sell its spare computing power, which caused META stock to rise. In May, CEO Mark Zuckerberg had already told shareholders that getting into cloud computing was “definitely on the table.” The CEO said that companies were approaching Meta almost every week, asking to buy the company’s API service or pay a premium for its spare compute. So, a company that looks like it already has compute to spare is now more than doubling its largest site.
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Both can be true. Data centers get built in huge blocks, based on what a company expects to need years ahead. That means that Meta can have spare capacity in one place and still be short in another. This is why the company can be planning to sell compute to firms while also buying compute from CoreWeave (CRWV) and Nebius (NBIS) for itself. If the cloud plan goes ahead, the extra capacity at Hyperion will no longer be a liability. It will become something Meta can sell. That would turn an investment of up to $145 billion this year into a revenue line, which is what investors have been waiting to hear.
About Meta Platforms Stock
Meta Platforms is a technology company built around social media, digital advertising, and artificial intelligence (AI). Its family of apps includes Facebook, WhatsApp, Instagram, Messenger, and Threads. Founded in 2004, the company is headquartered in Menlo Park, California.
Over the last 12 months, META stock has dropped 5%, significantly underperforming the S&P 500’s ($SPX) 21% gain during the same period. Much of the decline has been due to investors worrying about the company’s heavy AI spending. Recently, though, META stock has recovered well, increasing by 12% in the past month and 6% in just the last five days. This gain has been helped by reports that Meta is building a cloud unit to sell its spare computing power.
www.barcahrt.com Meta’s valuation looks reasonable despite the scale of its recent investments. The forward price-to-earnings (P/E) ratio of 22.4 times sits roughly in-line with the company’s five-year average. Meanwhile, the forward price-to-sales (P/S) ratio of 8.3 times is slightly above Meta's five-year average.
The EPS outlook explains investors' caution, with little-to-no earnings growth expected in fiscal 2026 due to heavy spending. The growth looks more promising in the coming years, though, with a 19% increase estimated for fiscal 2027. The balance sheet for Meta is strong as well. Net debt of $5.59 billion seems manageable for a company worth $1.72 trillion. If the cloud plan successfully turns Hyperion’s spare capacity into a revenue line, the picture will change. The spending holding back 2026 earnings could become the reason those earnings accelerate later.
Meta Revenue Jumps 33% as Capex Guidance Climbs Again
Meta reported its first-quarter fiscal 2026 earnings on April 29. Revenue of $56.3 billion increased 33% year-over-year (YOY), beating the $55.4 billion consensus estimate. Adjusted EPS of $7.31 also came in well above the consensus. The company marked its fastest revenue growth since 2021 during the quarter. Ad impressions grew 19%, while average price per ad increased 12% YOY. Zuckerberg stated that Meta had a strong quarter in terms of business and progress toward AI, with more than 3.5 billion people using at least one of Meta’s apps every day.
For Q2, Meta guided revenue to a range of $58 billion to $61 billion. The company also lifted its full-year 2026 capex guidance to $125 billion to $145 billion, up from the prior range of $115 billion to $135 billion. CFO Susan Li stated that the increase in capex was primarily due to higher component costs. When asked about return on invested capital (ROIC) on the Q1 earnings call, Zuckerberg said that Meta will continue to build products that reach billions first, then look to monetize them. On the business AI, the CEO also said that early versions are being tested and “weekly conversations have grown 10x since the start of this year.”
Meta is expected to release its Q2 results on July 29.
What Are Analysts Saying About Meta Stock?
Recently, Citizens JMP analyst Andrew Boone decreased his META stock price target from $825 to $800 while maintaining a “Market Outperform” rating. The analyst cited the release of Muse Spark 1.1 and the public preview of the Model API, enabling Meta to compete with leading AI labs. While a positive outlook, Boone believes rising computing needs carry execution risks, hence the price target reduction. UBS analyst Stephen Ju also recently decreased his META price target from $865 to $766 while maintaining a “Buy” rating.
Based on 53 Wall Street analysts with coverage, Meta Platforms holds a consensus “Strong Buy” rating with a mean price target of $823.50, indicating potential upside of 23% from current levels. The highest price target is $1,015, while even the lowest price target of $700 is marginally higher than the current stock price. This is a strong indication that analysts are backing Meta’s long-term potential over the heavy investment concerns.
www.barchart.com On the date of publication, Jabran Kundi 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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