Meta Stock Is Up 9% This Year. Is It Still a Buy Ahead of Earnings?

Meta Platforms is set to release its third-quarter 2026 earnings report on Oct. 21. Here’s Morningstar’s take on what to look for in Meta’s earnings and the outlook for its stock.

Key Morningstar Metrics for Meta Platforms

• Fair Value Estimate
  : $850.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

Meta Platforms Earnings Release Date

• Wednesday, Oct. 21, 2026, after the close of trading

What to Watch for in Meta Platforms’ Q3 Earnings

• We’ll see how Muse agent adoption plays out, and what management says regarding usage, trends, and its monetization path. This is likely the most important point for investors.
• Meta has landed near the top of its guided range the last two quarters. If it does that again, third-quarter revenue will come in around $63.8 billion. The composition of the growth will be super important too. We’d want to see a healthy mix of price-per-ad and daily active people growth.
• Full-year capex is guided to $130 billion-$145 billion, which means about $40 billion-$47 billion per quarter in the second half. Free cash flow will probably go negative. We will be listening for any indications about 2027 capex. Last quarter, the CFO gave nothing and talked about “flexibility,” so more of that means they’re dodging.
• Will Meta announce a signed deal to sell compute to an outside customer? And if it gives a price per gigawatt, how does it compare to the $9 billion assumption? This likely won’t happen, because Meta needs all the compute for Muse Wonder, Wonder Full, and Muse Agent, but it’s something to watch.
• Will there be any new legal charges on top of the second quarter’s $2.4 billion?

The following are excerpts from Morningstar’s company report on Meta Platforms.

Fair Value Estimate for Meta Platforms

With its 3-star rating, we believe Meta stock is fairly valued compared with our long-term fair value estimate of $850, which implies a 2026 adjusted price/earnings multiple of 26 times and an enterprise value/adjusted EBITDA multiple of 13 times.

We forecast Meta’s sales growing at a 22% compound annual growth rate for the next five years, spearheaded primarily by an increase in average revenue per user, with user growth also chipping in. We additionally expect Meta to leverage its AI data center buildout by renting out excess capacity to AI labs. We expect this business to grow from practically nothing in 2026 to $40 billion by 2030.

Read more about Meta Platforms’ fair value estimate.

Economic Moat Rating

We believe Meta merits a wide economic moat rating, due to its intangible assets and the potent network effect around its Family of Apps business. While the firm’s Reality Labs segment continues to hemorrhage cash, we believe FoA’s strong competitive advantages will likely allow the firm to generate returns in excess of its cost of capital over the next two decades.

We believe the firm has built significant intangible assets, primarily via the customer data it collects and a potent network effect that has made it the world’s dominant social media company. The FoA segment includes revenue from its social media applications, including Facebook, Instagram, WhatsApp, and Messenger.

Meta’s scale is also important when contextualizing the firm’s ongoing investments in AI. Meta’s capital expenditure, mostly on data centers equipped with expensive graphics processing units, has led investors to question whether the firm’s investments in AI will yield meaningful results and generate returns in excess of the firm’s cost of capital. When discerning the impact of these AI investments on Meta’s return on invested capital profile and its durable competitive advantage and differentiation, we see positives and negatives.

Read more about Meta Platforms’ economic moat.

Financial Strength

We view Meta’s financial position as rock-solid. The firm closed out fiscal 2025 with cash and cash equivalents of $82 billion, more than offsetting its debt balance of $59 billion. While the firm’s investments in AI stand to increase its capital expenditure considerably over the next few years, the firm’s advertising business remains a cash-generating machine, churning out tens of billions of dollars of free cash flow on an annual cadence.

Read more about Meta Platforms’ financial strength.

Risk and Uncertainty

We assign Meta an Uncertainty Rating of High. We believe the firm’s investments in unprofitable ventures such as generative AI and Reality Labs add uncertainty to its business, even as its large and stable advertising business continues to generate substantial cash flows in our forecast.

We believe Meta’s considerable scale and intangible assets, such as its ad-targeting algorithms, will most likely enable the firm to maintain its dominance in the social media space. While there are antitrust concerns around Meta’s business, we view an often-hypothesized breakup of its applications into separate businesses as unlikely.

Read more about Meta Platforms’ risk and uncertainty.

META Bulls Say

• Meta’s core advertising business has benefited greatly through improved ad targeting and content recommendation algorithms as well as a secular increase in digital advertising spending.
• Meta’s scale, with the majority of the world’s internet-connected users accessing its applications, allows it access to high-quality user data, which it can package and sell to advertisers.
• The firm has an opportunity to drive more ad inventory growth, leveraging new products such as Threads while also improving its monetization of ads on more nascent features such as Stories and Reels.

META Bears Say

• Meta’s investments in Reality Labs and generative AI stand to lose the firm billions of dollars annually, taking some of the shine off its overall business.
• Meta has disproportionately benefited from increased ad spending by Chinese retailers, including Temu and Shein. A slowdown in spending by these firms could hit Meta’s growth.

This article was compiled by Lauren Solberg.