After the market closes on April 29, Meta will release its first-quarter results for fiscal 2026. This will be the company’s first full earnings report since announcing its massive $115–135 billion AI capital expenditure plan — a critical moment that will determine whether its current valuation narrative can hold.

On one hand, Meta is poised to overtake Google in global digital ad revenue. On the other, surging AI spending and growing regulatory risks continue to cloud the outlook for returns on this ambitious investment.

Market expectations for this quarter are elevated. Revenue is projected to reach between $55.3 billion and $55.4 billion, representing year-over-year growth of approximately 31%–32%. If achieved, this would mark Meta’s first return to over 30% quarterly revenue growth since the post-pandemic digital advertising boom in 2021.

Earnings per share are expected to come in around $6.69. However, profit growth is likely to slow to roughly 5% year-over-year, primarily due to the impact of rapidly expanding capital expenditures.

Since Q4 2022, Meta has delivered 12 consecutive quarters of earnings beats, often by wide margins. Over the past five quarters, revenue has exceeded expectations by an average of more than $1 billion per quarter.

However, consistent outperformance has become the market’s baseline expectation. Beating estimates is no longer enough to impress investors. Microsoft’s recent experience — where a slowdown in Azure growth triggered a near 10% stock drop — highlights how sensitive markets have become to any sign of weakening returns on capital spending.

Wall Street remains strongly bullish on Meta, supported by several key factors.

First is valuation. With a forward price-to-earnings ratio slightly above 22x, Meta is considered relatively conservatively priced. This implies only modest earnings growth expectations, creating a gap between market pricing and the company’s potential for double-digit EPS expansion.

More importantly, confidence is rooted in the pace of AI monetization. CEO Mark Zuckerberg has stated that Meta is already seeing AI-driven revenue growth, a narrative fundamentally different from its earlier metaverse investments, which have yet to deliver meaningful financial returns.

Additional growth drivers include:

• WhatsApp monetization: Testing premium subscription services across a user base exceeding 3 billion monthly active users

• Cost optimization: Reports of potential layoffs of around 8,000 employees, signaling both cost discipline and a broader shift toward AI-driven organizational restructuring

Together, these initiatives reinforce the view that Meta is evolving into an AI-powered advertising platform.

Market Interpretation

Despite the strong long-term narrative, some analysts maintain a cautious or neutral stance.

Their core concern is timing. While Meta’s AI strategy appears promising, the stock is already trading near historical highs, and the return on its massive capital expenditures remains uncertain at this early stage.

In this context, a more prudent strategy may be to hold positions at reasonable valuations while waiting for clearer evidence that AI investments are translating into sustainable financial returns.