VALUATION HIGHLIGHTS

1. Core Advertising constitutes 98% of the Trefis price estimate for Meta Platforms's stock.

WHAT HAS CHANGED?

META Stock Performance In Recent Years

The performance of META stock has been highly inconsistent over the past five years, characterized by extreme volatility compared to the broader market. Between 2021 and 2022, META struggled significantly, underperforming the S&P 500 in both years—most notably in 2022, when the stock plummeted 64% against the index's 19% decline.

However, the stock saw a dramatic turnaround during its "recovery phase" (2023–2024), where it surged by 194% and 66%, respectively, far outstripping the S&P 500. This streak of outperformance leveled off in 2025; although META posted a respectable 13% gain, it once again trailed the S&P 500's 18% return for the year.

Latest Earnings

Meta Platforms finished 2025 on a high note, delivering a strong fourth-quarter performance that signaled a clear recovery from the tax-related volatility of the previous period. For Q4 2025, the company reported total revenue of $59.9 billion, representing a robust 24% year-over-year increase, primarily fueled by a 24.3% surge in advertising revenue as AI-enhanced ad tools continued to gain traction. Unlike the third quarter, which was heavily impacted by a $15.93 billion one-time tax charge from the "One Big Beautiful Bill Act," the fourth quarter saw a return to normalized profitability. Net income rose to $22.8 billion, resulting in diluted earnings per share of $8.88—a significant jump from the $1.05 reported in Q3 and an 11% increase compared to the $8.02 earned in the same quarter the previous year.

Operating efficiency also remained a central theme as the company moved past the anomalous tax events of the fall. The operating margin stabilized at 41% for the quarter, while costs and expenses rose to $35.15 billion as Meta accelerated its investments in technical talent and AI infrastructure. On the user front, engagement continued its steady climb, with Family Daily Active People reaching 3.58 billion by year-end, a nearly 7% increase over the prior year. This sustained growth in the user base, combined with a 16% increase in average revenue per person, allowed Meta to close out 2025 with a total annual return of 13%, successfully navigating a year defined by both legislative headwinds and aggressive technological expansion.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below, we highlight key drivers of Meta Platforms' value that present opportunities for upside or downside to the current Trefis price estimate for META.

Advertising On Core Meta Platforms

• Meta Platforms' advertising revenue more than doubled between 2020 and 2025, climbing from $84 billion to $196 billion. This growth is underpinned by a consistent rise in global internet penetration and a broader corporate shift toward digital-first advertising strategies. Driven by these tailwinds, we project that Meta’s advertising revenues will triple by the end of our forecast period.

BUSINESS SUMMARY

Meta Platforms operates the world's largest social media ecosystem, connecting billions of users across Facebook, Instagram, WhatsApp, Messenger, and Threads. The company generates revenue primarily through digital advertising, leveraging its advanced AI systems to deliver highly targeted ads based on user interests, behaviors, and demographics across its family of apps.

Beyond advertising, Meta's revenue streams include: Reality Labs hardware sales, including Meta Quest VR headsets, Meta Quest Store revenue from app sales and in-app purchases, Transaction fees from payments processed through Meta Pay, Subscription services like Meta Verified, Creator monetization tools, including tipping, subscriptions, and paid events. Enterprise solutions for businesses and workplaces.

Meta continues to invest heavily in artificial intelligence, positioning itself at the intersection of social connection, commerce, and immersive technologies. The company's business model has evolved from simply facilitating social connections to creating a comprehensive digital ecosystem spanning communication, entertainment, shopping, and virtual experiences.

SOURCES OF VALUE

Advertising On Core Meta Platforms

Advertising remains the primary revenue driver for Meta Platforms, accounting for the vast majority of the company’s overall value. This success is fueled by two key elements: scale and user engagement. Currently, Meta’s suite of apps—including Facebook, Instagram, WhatsApp, and Messenger—reaches over 3 billion monthly active users. Innovative enhancements, such as immersive video experiences, advanced augmented reality features, and integrated virtual reality environments, have significantly boosted user engagement across its platforms. Looking ahead, Meta is poised to further expand its mobile and immersive technology offerings, ensuring that both scale and engagement continue to grow.

In parallel with its extensive user base, Meta has evolved its monetization strategy to meet the changing needs of the digital landscape. By refining ad targeting capabilities, introducing interactive ad formats, and integrating seamless e-commerce functionalities within its platforms, Meta has enhanced the return on investment for advertisers while delivering a cleaner, more engaging user experience. These strategic initiatives not only reinforce Meta’s leadership in digital advertising but also pave the way for sustainable long-term growth.

KEY TRENDS

Other Platforms Have Huge Growth Potential

Meta’s ecosystem - which now features WhatsApp, Instagram, Messenger, Threads, and its latest immersive technology platforms — continues to offer substantial growth opportunities. Strategic investments in these areas, including advancements in augmented reality, virtual reality, and integrated social commerce, are paving the way for multi-billion-dollar revenue streams. Recent innovations and strategic integrations across Meta’s portfolio indicate that the company is effectively unlocking new value. Looking ahead, we expect these dynamic components to drive significant top-line growth for the foreseeable future.

META's Artificial Intelligence (AI) Initiatives To Drive Growth

Meta is accelerating its long-term growth strategy by channeling substantial investments into AI technologies. The company has transitioned from early-stage experiments into developing robust, scalable platforms that integrate virtual, augmented, and mixed-reality experiences into its suite of social applications.

At the core of its AI strategy is the deployment of advanced machine learning algorithms that enhance personalized content recommendations, optimize advertising performance, and power interactive, generative experiences across its ecosystem. Meta is also exploring innovative approaches in immersive computing and digital twin technologies to redefine how users interact with digital spaces.

These forward-thinking initiatives are designed to create a seamless, intelligent digital ecosystem that not only enriches user engagement but also unlocks new revenue opportunities, setting the stage for sustainable growth in the coming years.