Meta Platforms' (META +1.20%) shares have taken a beating in 2026. As of this writing, the stock is down about 8.5% year to date. And this adds to a rough patch at the end of 2025 as investors were spooked by the tech company's big spending plans. Since the company's third-quarter earnings report on Oct. 29, shares have slid about 20%.
With the stock losing about a fifth of its value in such a short period of time, this is a good time for investors to take a look at the growth stock to see if this is a buying opportunity or a sign of more problems to come.
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Meta Platforms: strong business momentum
It's difficult to critique Meta's recent business performance. As the parent company of Facebook, Instagram, WhatsApp, Threads, and Meta AI, the business is not just growing rapidly, but it's growing at an accelerating rate. Even more, its investments in AI (artificial intelligence) are already paying off.
Meta's third-quarter revenue rose 26% year over year, accelerating from 22% in Q2 -- and a huge part of this growth is from AI. Management said that its strong performance in its ads business in Q3 was largely due to improvements in its AI ranking systems. In fact, Meta CEO Mark Zuckerberg noted during the company's third-quarter earnings call that the annual revenue run rate for its end-to-end AI-powered ad tools has now surpassed $60 billion. Additionally, the company is seeing explosive growth in user engagement for its AI assistant, Meta AI, which is used across its social media applications and even has its own app. The AI assistant already boasts more than 1 billion monthly active users, Zuckerberg noted.
The best news? Meta remains extremely profitable. Its income from operations in Q3 rose 18% year over year to $20.5 billion. In addition, free cash flow, which is the company's cash flow from operations less capital expenditures, came in at nearly $11 billion in Q3 alone.
To top it all off, Meta trades at a very conservative valuation of 27 times earnings. And this valuation is even cheaper when measured by the stock's forward price-to-earnings ratio, which looks at a stock's valuation as a multiple of analysts' consensus forecast for a company's earnings over the next four quarters. Meta's forward price-to-earnings ratio is just 21.
And it's worth noting that Meta guided for a strong holiday quarter, too. Management forecast fourth-quarter revenue to be between $56 billion and $59 billion during the period. This compares to about $48 billion of revenue in the fourth quarter of 2024.
NASDAQ: META
Key Data Points
It's time to buy Meta stock
Overall, this looks like a good time to buy shares of the tech company. Not only is Meta already showing tangible progress from AI, but its valuation is attractive.
Of course, there are risks to the bull case for Meta stock. The main one is the company's aggressive spending plans. Driven by the company's huge appetite for AI compute, the social media company's capital expenditures have been soaring, so much so that management recently raised its forecast for full-year 2025 capital expenditures to a range of $70 billion to $72 billion, and it guided for third-quarter capital expenditures to be well over $100 billion in 2026. If Meta doesn't earn the return it expects from these capital expenditures, this big spending could weigh heavily on profitability and the stock's performance in the coming years.
Ultimately, however, I believe Meta stock's conservative valuation in relation to its underlying robust business momentum does a good job of pricing in its risks. For this reason, I think buying shares on the dip makes sense.
