Meta Platforms (META -0.27%) is one of the most dominant businesses on the planet. It has a huge market capitalization of $1.9 trillion. And between the company's various social media platforms, it has a whopping 3.48 billion daily active users.
This "Magnificent Seven" stock has soared 367% in the past three years (as of Sept. 4). Strong financial performance is, unsurprisingly, the key contributor to this gain. However, I believe there's one important reason why Wall Street is so obsessed with Meta Platforms.
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Improving profitability
In 2022, Meta registered an operating margin of 25%, down from 40% the year before. The ad market experienced a slowdown in the face of rapidly rising interest rates. Founder and CEO Mark Zuckerberg was also focused on making heavy investments to support his metaverse ambitions.
Things have changed for the better, though. In the latest quarter (Q2 2025, ended June 30), Meta reported a stellar operating margin of 43%. Revenue has continued to increase at a robust double-digit pace. And the business has prioritized operational efficiencies with a number of layoffs in recent years.
Looking ahead
I believe this drastic improvement in the company's operating margin is a top reason why the investment community has fallen in love with Meta Platforms. Seeing the bottom line expand like this can certainly drive bullish fever, regardless of industry. Wall Street appreciates a fatter bottom line.
It's easy to remain optimistic as we look toward the future. These days, Meta is investing aggressively in artificial intelligence. But consensus analyst estimates call for operating income to grow at a compound annual rate of 13% between 2024 and 2027. This outlook could prove to be conservative, as the business has positively surprised investors in the past.
