Meta Platforms (META -0.63%) stock has lagged in 2025. Shares of the Facebook, Instagram, WhatsApp, and Threads parent are up about 13% for the year, while the S&P 500 has climbed about 17%.
The gap looks odd given how the business has performed. The company has kept pushing faster growth out of its ad platform across its social media properties -- and it has continued to invest aggressively in AI (artificial intelligence). If that spending does what management hopes, 2026 could be the year the stock rerates higher.
On the other hand, the same investment plan that could power the next leg of growth also raises the stock's risk profile. Any slowdown in revenue growth rates next year could derail investor confidence in Meta's plan to invest aggressively in long-term growth opportunities.
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Strong business momentum
2025 has been a standout year for the social media company's business.
Meta's second-quarter revenue rose an impressive 22%. This was a significant acceleration from 16% growth in Q1. But Meta didn't stop there. The third quarter pushed that pace to 26%, with quarterly revenue reaching more than $51 billion.
This growth was fueled by impressive advertising performance. In Q3, Meta's ad impressions rose 14% year over year. Additionally, average price per ad increased 10%.
And it looks like the company will likely wrap up the year on a high note. For the fourth quarter of 2025, Meta expects revenue to be between $56 billion and $59 billion. The midpoint of this guidance range implies 19% growth. But the high end would translate to 22% growth. Both of these figures are well ahead of the 16% growth the company started the year with.
Meta's biggest risk
The biggest risk for the stock is not hard to name. Meta is building an enormous amount of AI capacity, and the bill is rising quickly. The company told investors it expects 2025 capital expenditures, including principal payments on finance leases, to come in at $70 billion to $72 billion.
Then it raised the bar for 2026. Meta chief financial officer Susan Li said in Meta's third-quarter update that the company expects "capital expenditures dollar growth will be notably larger in 2026 than 2025."
She also warned that total expenses should grow faster in 2026, driven mainly by infrastructure costs, including higher depreciation and cloud spend.
This investment plan can work. Meta ended the third quarter with about $44.5 billion in cash and marketable securities. Additionally, it generated $10.6 billion of free cash flow (cash from regular operations less capital expenditures), even as its capital expenditures ramped up. And the company still managed to return cash to shareholders in the quarter. Specifically, it spent about $3.2 billion on repurchases and $1.3 billion on dividends.
But given the company's expectations for continued growth in capital expenditures, free cash flow will likely come down next year and possibly even turn negative, requiring the company to tap into its massive cash hoard.
NASDAQ: META
Key Data Points
So, given this combination of powerful business momentum and soaring spending, is Meta a buy going into 2026? With a price-to-earnings ratio of 29, the stock isn't cheap. But it may be worth paying up for. The stock's performance will likely boil down to whether Meta's big spending helps the company sustain its rapid top-line growth rates next year -- and given Meta's long history of strong execution, I think this is plausible.
While I ultimately like the stock headed into 2026, investors should keep in mind the risks and watch the company closely. In addition, any position in the stock should probably be kept small. Any signs that Meta's AI spending isn't going to help the business materially could be a reason to revisit the bull case.
