Meta Platforms (META) has seen a 12.4% surge in its stock over the past three months, outpacing the broader Zacks Computer & Technology sector, which rose by 5.8%. The company has also outperformed peers like Reddit, Amazon, and Alphabet, which have seen mixed results in the same period.
The rise in Meta's stock is driven by strong advertising demand, AI-driven improvements in ad targeting, and increased user engagement across its platforms, including Facebook, Instagram, and WhatsApp. The company's Advantage+ advertising solutions and AI-powered creative tools have further supported growth, with the launch of Muse serving as a key catalyst.
In the second quarter of 2026, Meta reported $59.4 billion in ad revenues, a 27% year-over-year increase, with a 14% rise in ad impressions and a 12% increase in the average price per ad. The company's AI-powered recommendation systems have strengthened user engagement, with Instagram time spent growing double digits and Facebook video time spent increasing by 9% globally.
Despite these strengths, Meta faces challenges, including rising infrastructure investments, higher operating expenses, and regulatory uncertainties. In the second quarter of 2026, total expenses surged 55% year over year to $42 billion, while operating income declined by 8%. The company expects capital expenditures of $130-$145 billion for 2026, driven by investments in servers, data centers, and network infrastructure to support AI.
For the third quarter of 2026, Meta anticipates revenues between $61 billion and $64 billion. The Zacks Consensus Estimate for third-quarter revenues is $63.18 billion, suggesting a 23.30% year-over-year increase. However, the company's shares are trading at a premium, with a forward 12-month price/sales ratio of 6.41X, higher than the broader sector's 6.05X.
Investors are advised to hold Meta shares until AI investments translate into stronger earnings growth and profitability, as the company navigates rising costs and stiff competition from AI agents like Google's Gemini and OpenAI’s ChatGPT.