Facebook-Parent Meta Surges Ahead of Connect 2026 Event
Yahoo Finance ·
Facebook-Parent Meta Surges Ahead of Connect 2026 Event Bryan Hayes Tue, September 22, 2026 at 10:46 AM EDT 5 min read META Few large-cap stocks had a rougher summer than Meta Platforms. The company reported strong revenue growth twice in a row, and investors sold the stock both times. After first-quarter results in April, shares fell more than 8%. After the second quarter in July, they dropped roughly 8% more. By the end of August, the stock that had been one of the great compounders of the past three years was down 13% in 2026, all while the S&P 500 had gained more than 10%. Something has changed in the past month. Meta has clawed back nearly 30%, outperforming the broader market as we inch closer to the fourth quarter. And the reasons behind that rebound suggest this may be more than a relief rally. It's worth being clear about why investors punished Meta, because the concern was legitimate. The second-quarter report showed revenue growing 28% to $60.8 billion — an excellent number for a company of this size. But earnings of $6.18 per share missed the roughly $7.10 consensus, and the reason was spending. Capital expenditures hit $31.1 billion in the quarter, up 57% from the first quarter, consuming about 98% of the company's $31.86 billion in operating cash flow. Free cash flow shrank to $784 million. Management narrowed its 2026 capex guidance to a range of $130 billion to $145 billion — nearly double the $72.2 billion spent in 2025 — and declined to offer a 2027 figure. Meta also took on another $24.9 billion of debt, bringing long-term debt to $83.7 billion, and repurchased zero shares for the second straight quarter after buying back $26.3 billion in 2025. For a company long prized for its capital returns, that was a genuine shift in identity. Meta had gone from returning capital to raising it, and investors wanted to know what the money was buying. Earlier this month, Meta META began answering that question. The company launched Muse, a personal AI agent powered by its Muse Spark family of models. The early reception was striking: the app reached as high as No. 3 in the U.S. App Store on its second day, with early usage running roughly ten times that of internal testing cohorts. Barron's described it as potentially the biggest AI launch since ChatGPT. Just as importantly, the underlying technology appears to have reached the frontier. JPMorgan analyst Doug Anmuth wrote that Meta's Superintelligence Lab "essentially delivered" on its goal of reaching the frontier within a year, culminating in Muse Spark 1.3, which he describes as competitive with leading models from OpenAI and Anthropic. Before getting to the new opportunities, it's worth remembering that Meta's core business was never the problem. The AI spending is already paying off here. Meta's GEM ad-ranking system has driven an 8.3% lift in Facebook ad clicks and a 15.7% improvement in conversions in early testing. Advantage+, the company's AI-powered campaign automation suite, now runs at a $75 billion annual revenue rate. Meta reaches 3.6 billion people every day across its family of apps — a distribution advantage that no competitor can replicate. What makes Meta's situation different from a year ago is that the AI investment now has visible paths to revenue beyond making ads work better. The first is the Muse agent itself, a consumer product with genuine traction. The second is Meta Model API access, which lets developers and enterprises pay to use Meta's frontier models directly. The third is the most interesting. On the second-quarter call, CEO Mark Zuckerberg noted that Meta is receiving offers for its computing capacity at a significant premium to what the company paid for it. That matters enormously for the capex debate. If Meta's own AI products don't absorb every dollar of the buildout, the company holds an asset that other buyers want to rent. The downside scenario for this spending looks considerably less dire than the market feared in July. That's why Wednesday matters. Meta hosts its annual Connect event on September 23rd, where the company is expected to showcase Muse's capabilities further and likely detail its AI product roadmap. It's the next opportunity to show analysts something concrete enough to change their models. Meta spent the summer being judged as a company spending too much with too little to show for it. In September, it started showing. The core ad business is still growing at a healthy clip, the frontier models appear competitive, and the capex now has a credible fallback in compute demand. Of course, the risks are real: free cash flow remains compressed, the balance sheet carries more debt than at any point in the company's history, and estimates are still falling. But with most of the capex reset already reflected in a stock that has trailed the market all year, Meta looks positioned to resume the uptrend that made it one of the defining winners of this cycle. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Meta Platforms, Inc. (META) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com).
DYAX Investor Sentiment
Bullish (Long) 67% · Bearish (Short) 33%
412 participants
Related News
- Meta Stock Gets Bold $750 Call as Muse AI Takes Off
- If This Stock Doubles, Here’s What $10,000 Could Become
- Fortinet Stock Jumps on Security Platform Demand: What's Ahead?
- Why Teekay Tankers Stock Dropped Today
- Can Intel's Core Ultra Expansion With Googlebook Benefit the Stock?
- SpaceXAI’s Grok Bot Agent users grew 24% from the prior week, tops 400,000 users after first month
