Featured Summary:
- Meta’s new AI products are attracting users
- 2026 capital spending is projected at $130 billion to $145 billion
- Revenue is growing while free cash flow has fallen
- Meta’s advertising revenue continues to grow as AI investment accelerates
Meta shares gained more than 20% after the September 8 launch of Muse, which reached 2.8 million downloads in the United States and Canada within 12 days and climbed to the top of U.S. app rankings, before the stock gave back 3.3% on September 25.
The product gains came during a year of heavier investment across Meta. Second-quarter revenue rose 28% to $60.8 billion as capital expenditure reached $31.08 billion, contributing to a drop in free cash flow from $8.55 billion a year earlier to $784 million.
Meta later raised the lower end of its 2026 capital-spending forecast, taking the range from $125 billion-$145 billion to $130 billion-$145 billion.
September brought another market reaction when Meta unveiled Muse Charm, with the shares rising more than 3% and adding about $56 billion in market value.
The move followed Muse’s rapid early adoption as Meta continued committing more money to the computing infrastructure behind its AI products.
The latest spending forecast now reaches $145 billion for 2026, after Meta began the year expecting between $115 billion and $135 billion.
Revenue is still expanding, but the increase in capital investment has made earnings and cash generation increasingly important to how investors value the next stage of Meta’s AI expansion.
Meta’s New AI Products Are Finding a Market
Meta expanded Muse to small businesses on September 29, adding connections to Shopify, QuickBooks, Stripe and Canva for sales, accounting and payment tasks.
The release extends the assistant beyond individual users into software used by merchants and small companies.
Meta’s hardware business provides a longer sales record. Strong U.S. orders for Ray-Ban Meta Display glasses led Meta and EssilorLuxottica to postpone an international rollout in January, while EssilorLuxottica reported that first-half sales of glasses developed with Meta had nearly doubled from a year earlier.
The company added $349 camera-free Ray-Ban Meta Audio glasses at Connect in September. Muse Charm and a $1,299 virtual-reality headset were unveiled at the same event, although Meta has not reported sales for those products.
Meta’s established apps provide a much larger audience than its standalone hardware. Facebook, Instagram, WhatsApp and the company’s other services averaged 3.60 billion daily active people in June, up from 3.56 billion in March and 3.58 billion in December.
Meta’s AI Infrastructure Costs Extend Beyond the Buildout
Meta is expanding data centers and computing capacity while signing long-term agreements for additional facilities.
Some of those commitments run beyond 2026, extending the cost of its AI expansion past the equipment included in this year’s capital-expenditure forecast.
Servers and data centers completed in previous years are also reaching Meta’s income statement through depreciation.
The company expects infrastructure depreciation to remain one of the drivers of expense growth in 2026 as more computing capacity enters service.
Technical hiring adds another expense outside the capital-spending forecast. Meta has recruited researchers and engineers for its AI teams, with employee compensation recorded separately from the money spent constructing facilities and purchasing servers.
The $130 billion-$145 billion forecast therefore captures capital investment scheduled for 2026, but not every expense attached to Meta’s AI expansion.
Depreciation on completed facilities, employee compensation and commitments for additional computing capacity continue beyond the year in which the underlying infrastructure is built.
Meta’s AI Returns Are Showing Up First in Advertising
Advertising generated $58.14 billion of Meta’s $60.80 billion in second-quarter revenue, up 28% from a year earlier, as ad impressions increased 18% and the average price per ad rose 9%.
Changes to Meta’s recommendation models increased time spent on Facebook by more than 5% and Instagram by more than 6% during the quarter, according to Chief Financial Officer Susan Li.
Meta also reported improved conversions from its advertising models but did not disclose how much additional revenue those changes produced.
Campaigns using Advantage+ sales products reached an annualized revenue rate above $70 billion, while those using Advantage+ creative tools exceeded $10 billion.
Those figures measure advertising campaigns run with the tools; Meta does not report them as separate AI revenue.
Reality Labs generated $370 million in second-quarter revenue, with Meta reporting the division’s devices and services together.
Revenue from individual products is not disclosed, and the company has not reported separate sales from Muse or the hardware introduced in September.
Meta Stock Is Moving From Adoption to Returns
Meta trades at about 22 times forward earnings, leaving the shares at a 21% premium to the S&P 500 on September 25. A gap that wide appeared on fewer than 1% of trading days over the previous five years.
Analysts expect revenue of about $254 billion this year, 26% above 2025, followed by roughly $306 billion in 2027. Consensus earnings per share stands near $31 for 2026 and $34 for 2027.
The 2026 earnings estimate stood at about $33.05 two months ago before falling to $31.21. Over the past 30 days, 45 analysts lowered their full-year estimates and four raised them.
Revenue is expected to grow more than 20% next year, compared with earnings growth of about 9%.
At 22 times forward earnings, Meta enters its next reporting period with a higher valuation and lower near-term earnings estimates than it carried before the September rally.
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