Key Points

The company's first-quarter advertising revenue grew 33% year over year.
Meta plans to spend up to $145 billion on capital expenditures this year, nearly double last year's total.
Whether that spending pays off will largely decide where the stock trades three years from now.

Shares of Meta Platforms (NASDAQ: META) sit about 25% below their all-time high reached last August, a slide that has left the social media giant lagging most of its big tech peers, even after clawing back from a late-March low. And it has happened while the underlying business is, by most measures, speeding up.

The latest pressure on the stock came on Friday, when reports surfaced that the tech company was considering raising tens of billions of dollars through a stock offering to help fund its AI build-out.

Whatever happens with this potential equity sale, the gap between a fast-growing company and a stock that cannot seem to get traction raises a question for investors: Is this discrepancy between the stock's performance and the underlying business a buying opportunity?

To assess the stock's potential, let's look at it in this frame: where could Meta be three years from now?

The answer may hinge on two opposing forces. One is an advertising engine that artificial intelligence (AI) is making sharper by the quarter. The other is a spending plan so large that it has started to weigh on profits and on investor patience.

Imag source: Getty Images.

An advertising engine running hot

Meta's first-quarter revenue (the period ended March 31, 2026) rose 33% year over year to $56.3 billion, or 29% on a constant-currency basis. Advertising, which accounts for about 97% of the company's revenue, did nearly all of the work, climbing 33% to $55 billion. Behind this advertising momentum, Meta served 19% more ad impressions and charged an average of 12% more for each one. Some of that pace reflects an easier comparison with a softer first quarter of 2025, but the direction is hard to dispute.

Behind the figures, AI is steadily reshaping the core business. Ranking improvements lifted time spent on Instagram Reels 10% in the quarter, and total video time on Facebook rose more than 8%. The same models are being aimed at the ads themselves. The company said recent changes drove a more than 6% jump in conversion rates for one common ad type, and more than 8 million advertisers are now using its AI tools to build ad creative.

A bet measured in the hundreds of billions

For all that strength on the top line, Meta's profit growth tells a more complicated story. First-quarter earnings came in at $10.44 per share, but that figure was inflated by an $8.03 billion tax benefit. Strip it out, and earnings were $7.31 per share, up about 14% - a fraction of the revenue growth rate. The reason for Meta's underperformance in earnings relative to its revenue growth? Spending.

Meta expects 2026 capital expenditures of $125 billion to $145 billion, raised from a prior range and nearly double the roughly $72 billion it spent in 2025.

CEO Mark Zuckerberg attributed much of the increase to higher component costs, particularly memory pricing.

Then there is Reality Labs, the company's virtual and augmented reality arm, which lost $19.2 billion in 2025 and more than $83 billion since 2020. Management expects those losses to hold near last year's levels in 2026 - a level it believes should mark the peak.

So, where does this leave the stock three years out?

A lot could go right. If AI keeps compounding engagement and advertiser returns, and the infrastructure Meta is building turns into profitable new products, today's price-to-earnings ratio of about 22 could prove cheap in hindsight.

And the company has notably at least left itself an exit.

If we end up not needing as much as we anticipate, we can choose to bring it online more slowly or reduce our spending in future years, said chief financial officer Susan Li during the company's first-quarter earnings call.

But the risks are just as real. With nearly all of its revenue tied to advertising, an economic slowdown could weigh heavily on Meta's business. And if growth cools while spending stays elevated, it would not be surprising if the stock's valuation multiple compressed. After all, heavy spending that does not translate into faster revenue could spook investors. Regulatory pressure adds another wild card; the company has warned of U.S. youth-related trials this year that could materially impact earnings.

Put those forces together, and the range of outcomes is unusually wide. Over the next few years, it would not be shocking to see Meta trade anywhere from the mid-$500s to around $1,000 - a span that says less about any single forecast than about how little visibility there is. This is a classic high-risk technology stock.

But for investors who believe in the durability of Meta's core business and in Mark Zuckerberg's long-term vision, the recent weakness may be a reasonable place to start a small position.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.