Recently, shares of Instagram and Facebook parent company Meta Platforms (NASDAQ:META) rose by almost 9 percent, reversing a trend of depressed share prices that had prevailed since late October. Why is Meta stock up so much, and can it continue to deliver further gains in 2026?
What’s Behind Meta’s Surge?
The recent increase in Meta’s share prices is directly attributable to its extremely strong earnings report for Q4 and the full year of 2025. In Q4, revenue increased by 24 percent on a year-over-year basis to $59.9 billion. Full-year revenue growth was only modestly slower at 22 percent, resulting in total revenues of $201.0 billion. Q4 also saw respectable earnings growth, with net income rising 9 percent to $22.8 billion. Net income for the year, however, was still down 3 percent.
Aside from financial metrics, Meta also saw strong user engagement in Q4. The number of people active daily across Meta’s family of platforms increased by 7 percent compared to the year-ago quarter, reaching 3.6 billion. As the owner of the two largest social media platforms in existence and the extremely popular WhatsApp messaging service, Meta enjoys an extremely strong moat in the social media space that still appears to be actively expanding.
Meta is also serving more ads across its platforms and receiving a more favorable price for them. For the full year of 2025, the number of ads served increased by 12 percent, while the average price per ad increased by 9 percent. Q4 saw even faster growth in the number of ads served at 18 percent, but the increase in ad price was a bit lower at 6 percent.
Cumulatively, these trends create an extremely attractive virtuous cycle for Meta. A growing number of active users on its platforms are now being served more ads, each of which commands a higher price than it did a year earlier. Crucially, Meta likely has room to keep this cycle up, especially when it comes to its pricing power. Due to the popularity of its platforms with advertisers and the targeting tools available to businesses of all sizes, Meta will likely be able to keep raising its ad prices as needed with a significant degree of elasticity.
Meta’s AI Investments
It’s also worth noting that Meta is among the AI hyperscalers currently pouring billions of dollars into building AI infrastructure. In Meta’s case, this investment may actually prove to be extremely beneficial. Meta is leveraging AI to drive growth in its advertising business by fine-tuning ads and deriving improved insights about interests from its massive pools of user data. AI was partially responsible for the strong growth Meta delivered in late 2025, and the business expects it will keep contributing to further success in 2026.
This year, Meta expects to nearly double its investment in AI infrastructure, with CapEx rising into the $115-$135 billion range. CEO Mark Zuckerberg is among tech’s biggest AI optimists, advancing a concept he refers to as personal superintelligence. In Zuckerberg’s view, Meta is uniquely positioned to provide AI tools that can massively enhance personal productivity to everyday users. Though it’s still too early to tell exactly what the introduction of Meta’s upcoming personal AI tools will mean for its revenue and earnings, the benefits of AI for its core social media advertising business are difficult to dispute.
Has Meta Become Overvalued?
Although META shares have moved considerably higher over the last week, they still don’t look especially expensive for a dominant tech business with significant room for forward growth. Shares of Meta are currently trading at 30.5 times trailing 12-month earnings and 40.0 times operating cash flow. For reference, Meta’s P/E actually makes it slightly cheaper than the S&P 500 overall, which currently averages a trailing price-to-earnings ratio of 31.4.
While certainly not low valuation ratios, Meta’s quality as a business likely justifies a certain degree of premium pricing. In addition to delivering a net margin of 30.1 percent over the trailing 12 months, Meta has maintained a return on invested capital of 24.0 percent. Meta is also expected to deliver considerable earnings growth going forward, with EPS growth expected to average slightly over 20 percent throughout the next five fiscal years.
Analyst forecasts also seem to suggest a decent amount of additional upside in Meta shares. The current price of META is $716.50, leaving further returns of 18.4 percent on the table at the analyst consensus price target of $854.31. Perhaps more telling is the fact that the lowest price target for Meta is $700, implying a downside of only 2.3 percent.
Is Meta a Buy Now?
Meta’s massive AI spending may raise eyebrows among some investors, especially those who remember the similarly bullish tone the business struck on Metaverse technology a few years ago. While Metaverse investments failed to pay off, the rollout of cutting-edge AI tools to everyday users could be an entirely different scenario.
More importantly, Meta still operates enormously valuable social media platforms that have demonstrated an exceptional capacity to generate revenue via advertising sales. Even if Mark Zuckerberg’s dream of personal superintelligence proves overly optimistic, Meta can still benefit significantly by rolling AI tools out to advertisers and using the technology to improve both ad targeting and conversion rates.
Meta has also started to use share buybacks and dividends to gradually return some of the huge amounts of cash it generates to its shareholders. In 2025, the business repurchased over $26 billion worth of its own shares, though the buybacks stopped by the end of the year as Meta deployed more cash to CapEx on AI infrastructure. What did continue were Meta’s dividends. Meta only started paying dividends in 2024, and the yield is currently very low at just 0.3 percent. With a payout ratio that’s still in the single digits, though, management has an enormous amount of room to raise the dividend going forward.
All told, Meta appears to be an extremely high-quality business trading at what seems to be a fair to slightly undervalued price. While there are still some unknowns related to its future AI ambitions, the stock could still be a good buy on the basis of its core social media business and the potential AI has to improve it.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.