Key Points

Meta Platforms faces stock price pressure due to its large capital expenditure budget.
These worries make sense because Meta needs to demonstrate solid returns from the billions invested.
Still, the first quarter advertising revenue results offer positive indications.

Investors had plenty to celebrate when Meta Platforms reported first quarter results in late April. Revenue rose 33 percent to 56.3 billion dollars while operating margins stayed at 41 percent and earnings per share beat expectations. The social media leader continues to perform well across its main operations.

So why did the market sell shares afterward? The stock fell following the release. Although some recovery has occurred since then, Meta Platforms remains well below its 52 week high of 796 dollars per share.

The explanation is clear: The market has grown cautious about Meta ongoing heavy investments in artificial intelligence. Here is whether buyers should hesitate before purchasing shares today.

Image source: The Motley Fool.

Meta may direct over half its revenue toward AI this year

Meta raised its planned 2026 capital expenditures by 10 billion dollars to a range between 125 billion and 145 billion dollars, compared with the prior range of 115 billion to 135 billion dollars. Analysts project Meta will generate roughly 253 billion dollars in revenue for the current fiscal year. Therefore the company could allocate more than half its revenue toward spending focused mainly on artificial intelligence.

CEO Mark Zuckerberg shows strong conviction regarding AI importance to Meta future operations. Yet conviction alone is not enough. Meta has directed billions into Reality Labs over multiple years and continues to record steep losses, including another 4 billion dollars in the first quarter.

That explains why market concerns appear justified. All the AI spending could prove worthwhile, yet AI must eventually deliver meaningful returns on those investments.

AI supports Meta core operations with impressive results

Immediate benefits appear in the core advertising segment, where AI assists Meta in delivering more ads and improving monetization. AI automates ad placement, matches ads with suitable audiences, and suggests content to users. Meta reported ad impression growth of 19 percent and price per ad growth of 12 percent in the first quarter, both higher than the 5 percent and 10 percent growth seen in the first quarter of 2025.

Meta still requires additional time to generate revenue from consumer facing AI offerings. These include its ChatGPT style product, the Meta Quest headset line, and AI powered smart glasses. It remains early to determine their ultimate potential, though Mark Zuckerberg has consistently pursued ambitious product development.

If Meta were viewed as a consensus favorite, its shares would likely carry a higher valuation today. The spending levels are substantial and represent a continued risk. Yet with Meta stock trading below 19 times 2026 earnings estimates, the valuation appears attractive enough to accept that risk. Even amid spending concerns, analysts project average annual earnings growth of 19 percent over the next three to five years.

Looking at the broader outlook, Meta top and bottom lines stand a good chance of rising over the next five to 10 years compared with current levels. The stock price should follow a similar path.

Should investors purchase Meta Platforms shares at present?

Before purchasing Meta Platforms shares, note the following points. The valuation appears reasonable given expected growth despite heavy spending. Analysts continue to forecast solid earnings expansion over the medium term, supporting a constructive view on the shares going forward.