Meta Platforms (META 0.51%) has been an up-and-down investment for years. While it had a strong 2025 heading into Q3 earnings (up about 30%), it has since lost all those gains. It's only up around 7% for the year, thanks to a poorly received Q3 earnings report.
In reality, the report wasn't bad at all. However, investors didn't appreciate Meta's spending plans, which caused the stock to tumble following earnings. However, this could be an opportunity to buy one of the top artificial intelligence (AI) stock picks on the market.
So, should you buy the dip on Meta's stock?
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Meta Platforms delivered excellent growth in Q3
Meta Platforms is the parent company of social media sites like Facebook and Instagram. It makes a ton of money from advertising on those sites, but it's looking for ways to ensure that it stays at the top of its business and captures new opportunities as they arise.
One area where Meta tried this was the metaverse; thus its name change. All the money Meta spent on this endeavor really didn't work out, and investors are growing concerned that Meta may be repeating this mistake with AI.
Meta believes that AI can improve its ad conversion rate, which it has already seen fairly strong success in doing. In Q3, its AI recommendations led to 5% more time being spent on Facebook and 10% more on Threads (its X competitor). Furthermore, it believes that AI can make a huge difference in its business operations.
NASDAQ: META
Key Data Points
At least so far, those investments seem to be working out. For Q3, Meta expected 20% revenue growth to $48.75 billion. It blew past those expectations, with revenue rising 26% year over year to $51.2 billion. That strength is expected to moderate in Q4, with Meta guiding for 19% growth at the midpoint.
Still, that's not a weak quarter by any stretch and shows that Meta's advertising business is thriving.
But that's not what investors took issue with.
Meta's capital expenditure plans are aggressive
During 2025, Meta expects to spend $70 billion to $72 billion on capital expenditures. That's a huge uptick from 2024's $39.2 billion. However, Meta's management noted that the capital expenditure dollar growth will be "notably larger" in 2026 than in 2025. With capital expenditures (in dollar growth) rising $33 billion this year, it's safe to assume that Meta's total will cross the $100 billion threshold in 2026.
It's significant because that's more of the Meta's cash flows total. This means that Meta is starting to take on debt or some other forms of financing to pay for its data center investments.
This shouldn't come as a surprise to any Meta investor, but it is a bit of a concern. Furthermore, CEO and founder Mark Zuckerberg commented on their earnings call that they aren't worried about overbuilding. That conveyed to investors that Meta is willing to spend everything it can find to build out its AI computing capacity, and that's a concern for short-term investors because they want profits now.
However, I disagree.
The reality is, Meta is spending a ton of money on AI now that may or may not pay off years from now. If it does, Zuckerberg will be justified. If it doesn't work out, Meta will eventually quit spending on AI computing capacity and return to generating massive profits.
This echoes what happened when the metaverse boom crashed years ago, and when Meta's stock tanked, it switched to profit mode, and the stock soared. I think we're seeing a similar setup here, making Meta a strong stock to buy right now.
