Tomislav Marinovic
Engineer, AI Value-Chain Research
Meta's commitment to building better AI models rather than slowing for AI-doom fears overturns the earlier reservations about its direction. Zuckerberg says Meta has caught up with OpenAI and Anthropic at the frontier, is doubling down on compute and sees safety as an engineering problem on the way to personal superintelligence. Bulls were right, and hopefully they win big. x.comÂ
Meta's better-than-expected revenue is why it should return to its roughly $800 all-time high. Revenue rose 26.1% year over year to $64.60 billion, above the $63.37 billion analyst estimate; quarterly EPS was $3.83 and net income was $9.86 billion. x.com x.comÂ
Meta's ad pricing and impressions still support its AI monetization case, but heavy spending has pushed free cash flow negative. Impressions rose about 10% and prices 14% as revenue reached $64.6 billion; FCF was negative $2.12 billion and a $9.89 billion state AG charge hit earnings. Scale only on weakness if comfortable with founder control under the planned non-voting Class C shares. Sustained cash burn would weaken the buyback and valuation case. x.comÂ
Meta's heavy spending raises questions about how it will earn a return even if its core business improves. Quarterly free cash flow fell from $13.2 billion in March 2026 to $1.7 billion in June and negative $1.2 billion in September. x.comÂ
Meta's decade of revenue and operating cash flow growth makes it worth at least $2T. LTM revenue rose from $18B in 2015 to $242B, and operating cash flow from $10B to $133B. A $10B legal charge tied to the teenagers case drove the quarterly EPS miss; without it, EPS would have been $7.40. Quarterly free cash flow turned negative for the first time in over 10 years, raising the question of whether the investment will pay off. x.com x.com x.comÂ
Meta's core advertising business is significantly outgrowing its biggest competitors even before factoring in the newer businesses it is building. Q3 ad revenue rose 26% year over year, versus 10.6% at Alphabet and 10.9% at Amazon. Back at 19x forward earnings, Meta is the most undervalued Magnificent Seven stock. x.com x.comÂ
Meta's cash generation turned negative in Q3, coinciding with the start of its share-price slide. It was Meta's first negative free-cash-flow quarter in more than a decade. A $25 billion share sale priced at $625 this week, and the shares are already below that price. x.comÂ
Meta's voluntary move is bullish because it expects to profit from it. Its massive debt capacity remains untouched and is increasing. x.comÂ
Meta's valuation is compelling again because its operating-cash-flow multiple has fallen while revenue growth accelerated over the past year. It trades at 12x operating cash flow, close to 10x 2027 operating cash flow. Its unique position should make it one of the AI era's biggest winners, with Muse becoming its best asset in the long run. The equity raise's timing was unwelcome, but that is now behind it. x.comÂ
Meta's AI spending is weakening conversion of strong ad growth into profit and cash, making its valuation one to approach patiently, not chase. Revenue rose 26%, but operating profit excluding a legal settlement rose only about 11%; $34.9B in quarterly capex exceeded $32.8B in operating cash flow. AI has helped ads, though other factors contributed. One negative free-cash-flow quarter is not an operating failure, but depreciation could squeeze margins unless new revenue covers costs. x.comÂ
Meta's AI infrastructure financing raises the risk that a long wait for revenue and profit will keep its shares volatile. It disclosed plans to raise up to $95 billion. @amitisinvesting warns that further dilution could keep the stock stuck even if the buildout eventually pays off. Meta's selloff is still a massive buying opportunity. x.com x.com x.comÂ