Meta Platforms (META 2.52%) continues to give investors reasons to cheer. The business reported impressive revenue growth of 24% in the fourth quarter of 2025 (ended Dec. 31), with earnings per share beating analyst estimates. Shares were immediately higher following the announcement.
Meta is on a hot streak. The social media stock has rocketed 387% higher in the past three years (as of Jan. 30). Excitement and optimism are ruling the narrative.
Is it possible that Meta shares change course and plunge in 2026? Investors should heed one warning. But there's also a reason to remain bullish.
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Meta stock's pattern is clear
Investors have heard that past performance provides no indication of results going forward. However, it's insightful if you look at Meta's stock chart.
Shares fell 26% in 2018. They then proceeded to post double-digit gains in each of the following three years. The stock dropped 64% in 2022, followed by double-digit returns in each of the next three years. Based on this cycle, Meta is due for a pullback in 2026. Simply based on the price chart, a decline would not be surprising, especially after such a monster performance.
Capital expenditures are ballooning
Turning our attention to the fundamentals, Meta revealed plans for $115 billion to $135 billion in capital expenditures (capex) this year. At the midpoint, this implies a notable 74% gain from the $72 billion allocated in 2025. Just to shine light on how much the company's spending has risen, Meta's capex in 2021 totaled just $19 billion.
The business is putting all its chips on the table. Founder and CEO Mark Zuckerberg is betting big on artificial intelligence (AI). Building data centers is a priority, an initiative called Meta Compute. It's also developing a new large language model called Avocado. "Our vision is building personal superintelligence," he said on the Q4 2025 earnings call.
I think investors should be concerned about this level of spending. If any cracks start to show that might indicate AI isn't living up to the hype, the market might punish Meta's stock.
NASDAQ: META
Key Data Points
Valuation is a reason to be interested
Even knowing that Meta is loosening its purse strings, investors won't find it difficult to want to buy and hold the stock. The current valuation is very compelling. Shares can be purchased at a forward price-to-earnings ratio of 24.8. If the valuation were much higher, it would raise the risk of market sentiment turning negative if Meta started to report disappointing results.
Shares have been on a terrific run. But it's not an expensive stock right now. The situation is compelling when you think about the company's revenue and profit gains.
