Shares of Meta Platforms Inc. (NASDAQ:META) witnessed a significant increase after the company announced rapid improvement in advertising sales and projected continued profit growth, reinforcing investor belief that its strategic focus on artificial intelligence is starting to yield tangible benefits. The prevailing question remains whether Meta can preserve this positive momentum as it intensifies investments in data centers, semiconductor technology, and new innovations to support its forthcoming growth phases.
Leading the positive outlook, JP Morgan analysts upheld their Overweight rating on Meta, assigning a target price of $825 by December 2026, as detailed in a research note issued by lead analyst Doug Anmuth. This endorsement reflects confidence in Meta’s potential for sustained growth supported by operational execution and technological advancements.
Robust Q1 Revenue Outlook Bolsters Share Performance
Meta’s stock rose by approximately 7% following its latest earnings report, notably outperforming the S&P 500 index which declined nearly 1% in the same timeframe. This surge was catalyzed by the company’s optimistic first-quarter revenue forecast, which anticipates foreign-exchange-neutral revenue growth accelerating to a range between 22% and 30%, an improvement from 23% in the fourth quarter. Additionally, Meta reaffirmed its commitment to operating income growth by 2026 and indicated that operating losses in its Reality Labs division are expected to reach their peak next year.
JP Morgan highlighted the significance of the accelerating first-quarter revenue, emphasizing that Meta continues to possess substantial capacity for AI-enhanced advertising expansion. The firm noted ongoing enhancements through product launches, increased computational infrastructure, and the growing incorporation of large language models aimed at optimizing ad targeting and overall performance metrics.
The research firm forecasts reported revenue growth to reach 25.5% in 2026, with a gradual deceleration over the year, followed by a 17% growth projection for 2027. Investor feedback collected suggests a potential revenue growth range of 25% to 30% in 2026, with some market participants considering the anticipated slowdown beyond the first quarter as possibly conservative.
Rising Infrastructure Costs Temper Optimism
Balancing investor enthusiasm are substantial increases in Meta’s cost structure. JP Morgan’s report draws attention to the company’s markedly higher 2026 guidance for GAAP expenses, estimating them between $162 billion and $169 billion. This represents an increase of 38% to 44% year-over-year. Correspondingly, capital expenditure estimates stand at $115 billion to $135 billion for the same period, up 65% to 94% year-over-year.
During 2025, Meta’s net property, plant, and equipment rose 45% year-over-year, driven primarily by investments in server capacity and networking assets now totaling approximately $98 billion. JP Morgan projects that capital expenditures will escalate further, reaching $133 billion in 2026 and $168 billion in 2027. These investments are expected to compress free cash flow to roughly $5 billion in 2026 and $6 billion in 2027, reflecting the sizeable outlays required to support future growth.
Reality Labs Losses Expected to Peak Next Year
Meta’s Reality Labs division, focused on augmented and virtual reality technologies, is projected to see its operating losses peak around $19.7 billion in 2026. The company is allocating approximately 70% of Reality Labs operating expenses to wearables initiatives, while the remaining 30% is dedicated to virtual reality and metaverse-related projects such as Horizon.
Analysts also noted a considerable increase in Meta’s non-cancelable contractual obligations, rising sharply from $33 billion at the end of 2024 to $131 billion at the close of 2025. This surge largely stems from longer-term third-party cloud capacity agreements and infrastructure commitments integral to Meta’s strategic expansion.
Future Investor Focus and Market Reaction
Looking ahead, JP Morgan indicates that investor attention will concentrate on Meta's capacity to maintain revenue growth post-first quarter, the emergence of new monetization channels, and the progress of the company’s large language model projects as they approach cutting-edge artificial intelligence capabilities.
As of Monday’s market close, Meta Platforms shares were trading marginally lower by 0.69% to $711.59, based on Benzinga Pro data.
Overall, while Meta demonstrates promising growth driven by AI and accelerating advertising revenues, the company’s escalating expenses—particularly in infrastructure and Reality Labs—pose challenges that investors will continue to evaluate as Meta advances its technology investments and business strategies.