Key points
- Erste Group upgraded Meta to Buy from Hold on July 7.
- Meta's Q2 revenue rose 28% to $60.8 billion. Free cash flow fell 91% to $784 million.
- Meta raised its 2026 capex guidance to $130 billion to $145 billion.
Meta (META) closed at $545.83 on August 20, about 31% below its 52-week high. That same day, BNP Paribas analyst Nick Jones reiterated his Outperform rating with an $855 price target, about 57% above where the stock traded. Two more bullish calls landed the same summer, each betting on a different part of the same spending story.
The compute case
Jones's note argued Meta has built computing capacity well beyond what its own products need right now. He wrote that Meta plans on "monetizing AI intelligence rather than functioning as a commodity compute infrastructure provider," meaning any cloud deals would be selective rather than Meta becoming a full competitor to Amazon Web Services, according to a recap of the note.
Mark Zuckerberg raised the same idea himself at Meta's annual shareholder meeting in May. He said a cloud computing business is "definitely on the table," and that companies approach Meta "almost every week" asking to buy access to its AI models or spare compute. Meta hasn't done it yet, he said, because it still expects to use the capacity itself: "If we get to a point where we feel that we have overbuilt, then that is an option that we have," he said.
Q2 by the numbers
Meta's second-quarter revenue came in at $60.8 billion, up 28% year over year. Advertising made up $59.4 billion of that, up 27%, on ad impressions up 14% and the average price per ad up 12%. Capital expenditures, including finance lease payments, ran $31.1 billion for the quarter. Operating cash flow was $31.9 billion. Free cash flow came in at $784 million, down 91% from a year earlier. Operating margin was about 41%, down from a 48% peak in late 2024.
Meta raised its full-year 2026 capex guidance to $130 billion to $145 billion, up from a prior $125 billion to $145 billion. We covered what to watch into that print when the numbers landed. AMD's warrants to Meta and OpenAI, tied to the same buildout, are now worth about $152 billion combined.
Where the money is going
Meta and BlackRock announced a joint venture in July to build a 1-gigawatt data center campus in El Paso, Texas. Meta's investment is more than $10 billion. Capacity is expected to start coming online in 2028. Meta broke ground the same month on a 1-gigawatt site in Sturgeon County, Alberta, its first data center in Canada. Campuses are also under construction in Lebanon, Indiana and Richland Parish, Louisiana. We wrote about the $1 billion fund Meta set up for its data center host communities and its move to back Texas's data center grid audit earlier this month.
The valuation case
Engel's case leaned on numbers already in hand. In his July 7 note he pointed to 26% revenue growth over the trailing twelve months and 82% gross margins, and called Meta's price-to-earnings ratio slightly below the sector average. He concluded Meta looked undervalued even with 2026 capex guidance already raised to $125 billion to $145 billion at the time.
Seeking Alpha contributor TQP Research, a research shop run by a CPA, upgraded Meta to Buy from Hold on August 22, pointing to a 26% drop in the stock from around $742. The note argued the pullback gives Meta a margin of safety, since the current price only requires the company to compound free cash flow at 15.7% annually for a decade to justify it. It cited a 22% increase in return on ad spend as evidence AI investment is already showing up in ad performance. This is a contributor rating, not a sell-side analyst call like BNP Paribas's or Erste Group's.
Our own tracker puts the broader Wall Street consensus at Strong buy, with 57 analysts covering the stock and an average price target of $754.14, in a range of $580.00 to $1,000.00.
The legal risk
TQP Research named one risk directly: a youth-safety trial. Opening arguments began August 17 in federal court, where California Attorney General Rob Bonta is co-leading a coalition of 29 state attorneys general against Meta over claims it fostered addictive behavior in teens and children. The states' first witness was Arturo Béjar, a former Meta engineer who spent eight years in the company's product safety group, who testified about internal studies on harmful content reported by young users, according to CNBC.
Market data as of August 21, 2026. This article is for informational purposes only and is not investment advice.
