‘Hold Your Horses,’ Says Wedbush About Meta Stock Ahead of Earnings

This Q2 earnings season is all about hyperscaler spending plans. Combined AI investment by major platforms is expected to approach $725 billion in 2026, putting growing pressure on FCF (free cash flow) and turning investors’ attention from the infrastructure buildout to the profitability of those investments.

Claim 55% Off TipRanks

• Unlock powerful investing tools with TipRanks Premium to make smarter, more confident investment decisions
• Subscribe to TipRanks Smart Investor Newsletter, and discover new investing opportunities with data-backed stock picks

As such, with Meta Platforms (NASDAQ:META) set to deliver its Q2 readout next Wednesday, July 29, its CapEx plans will be closely watched, with the company having seen significant growth on this front.

Wedbush analyst Ygal Arounian expects that trend to continue as the company pursues its Superintelligence ambitions and expands its Muse Spark foundation models.

While Arounian does not anticipate specific 2027 CapEx guidance, he believes Meta could raise its 2026 outlook again and signal that spending will increase materially in 2027. His estimates and consensus estimates currently call for 2026 CapEx of $138 billion and $139 billion, respectively – both slightly above the midpoint of management’s $125 billion to $145 billion guidance range. For 2027, Arounian estimates CapEx of $173 billion, broadly in line with consensus at $175 billion, although he believes buy-side expectations are already above $200 billion and could rise some more. The spending trajectory could determine whether Meta’s FCF turns negative in 2026 or 2027, compared with Arounian’s current expectation of “slightly positive.”

Arounian will also be watching the health of Meta’s advertising business and the benefits generated by AI. AI-driven improvements have become a “clear lever,” with advances in Andromeda’s compute efficiency, Lattice modeling and the GEM model architecture already delivering benefits. Business AI is also making early progress, although it has yet to be directly monetized. “We look for updates on continued progress, and ability to drive further outsized gains in impression and pricing growth,” the analyst said.

Arounian views Meta’s Business AI initiatives as one of the company’s more advanced AI monetization opportunities outside of advertising improvements. Meta launched the Meta Business Agent and Meta Business Agent Platform at Conversations 2026 in June, offering businesses AI agents that operate across WhatsApp, Messenger and Instagram. The tools can handle customer inquiries, product recommendations, appointment bookings, lead qualification and sales conversion.

The next phase of Meta’s AI strategy and monetization efforts will also be important. Longer term, Arounian believes opportunities could include selling excess computing capacity (as recently reported), expanding subscription tiers, and potentially licensing Muse Spark to enterprise and consumer users or offering API access.

Summing up, Arounian takes a balanced view of the social media giant’s prospects. “The gap between capex intensity and diversified monetization remains the central debate for the stock (although strength in the core ad business is certainly a positive), in our view, and the reason we remain on the sidelines despite Meta’s valuation discount to peers,” the analyst summed up.

To this end, Arounian maintained a Neutral (i.e., Buy) rating on the shares, backed by a $671 price target, a figure suggesting shares will gain 6.5% in the year ahead. (To watch Arounian’s track record, click here)

Most of Arounian’s colleagues have a more upbeat stance. All in, the stock claims a Strong Buy consensus rating, based on a mix of 35 Buys and 5 Holds. Going by the $805.98 average price target, a year from now, shares will be changing hands for a 28% premium. (See Meta stock forecast)