April 29 was a big day for markets as four hyperscalers — Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) — released their quarterly earnings. The market's reaction to these earnings reports has been quite mixed, though. Alphabet is soaring and building on its year-to-date (YTD) gains, while its digital advertising rival, Meta Platforms, is plunging and testing the $600 price level.
Both of these companies reported better-than-expected earnings. Still, while Alphabet is getting all the love for its progress in artificial intelligence (AI), there are growing concerns over Meta’s AI strategy despite its aggressive spending on building infrastructure. Let's take a closer look at the bullish and bearish theses for META stock.
Should You Buy the Dip in Meta Platforms?
There are three reasons it makes sense for investors to buy the dip in META stock today.
For one, while Meta’s user base might see low single-digit growth at best, the company has several monetization opportunities. For instance, it is expanding ads on Threads to all remaining countries and will gradually roll out more ads in WhatsApp. Paid messaging in WhatsApp is another growth driver for Meta, and during the fourth-quarter 2025 earnings call, management said that the business had an annual revenue run rate of over $2 billion.
Next, AI is helping drive engagement on Meta’s social media platforms through better recommendations. Artificial intelligence is also leading to more personalized ads, which is one of the reasons for the stellar top-line growth the company has reported in recent quarters, including Q1.
Finally, META stock currently has reasonable valuations. Meta Platforms trades at a forward price-to-earnings (P/E) multiple of just 22.4 times. Notably, Reality Labs' losses — which the company expects to peak this year — have been taking a toll on earnings. As these losses narrow in the coming years, Meta’s profitability should improve.
The Bearish Thesis for Meta
Meanwhile, Meta does faces some challenges that should keep investors cautious.
First, the company faces both AI monetization concerns and soaring capital expenditures. Meta just raised its 2026 capex budget to between $125 billion and $145 billion. Other hyperscalers have sprawling cloud businesses that are reaping the benefits of AI and helping them justify their capex budgets. Amazon, Microsoft, and Alphabet — the top three cloud companies in the U.S. — are witnessing an expansion in cloud growth, with Alphabet reporting 63% revenue growth for Google Cloud in Q1. Meta Platforms, on the other hand, relies heavily on the digital advertising business. To its credit, AI-led improvements have helped Meta turbocharge the core business, and its Q1 revenue growth was actually the highest among the "Magnificent Seven" peers that reported earnings on April 29. However, the company has been struggling to shed the impression that it's an AI laggard compared to other hyperscalers. Incidentally, Meta hasn’t been a shining example of capital efficiency, as is reflected in the billions of dollars (and counting) in accumulated losses for its Reality Labs segment.
On a related note, Meta is a much more concentrated business than other hyperscalers with diversified revenue streams. The company has been working on wearables, but these account for a tiny fraction of its overall revenues. Additionally, while Microsoft and Alphabet have been growing their subscription businesses, which provide a steady stream of recurring income, Meta does not yet have any major paid subscription business apart from ad-free subscriptions in the United Kingdom and Europe.
Finally, there is a growing clamor around banning or restricting social media for children. Australia has already banned kids below the age of 16 from using social media, becoming the first country to do so, while several European countries are at various stages of enforcing bans for kids. Stateside, a Los Angeles jury found in March that Meta and YouTube were negligent in protecting children on their platforms — and deliberately structured their platforms to make them addictive. These legal issues are a hanging sword for Meta. During the Q1 earnings call, CFO Susan Li said, “We continue to see scrutiny on youth-related issues and have additional trials scheduled for this year in the U.S., which may ultimately result in a material loss.” Teens have been a key user group for social media companies like Meta, so restrictions on them using its platforms are a big risk for the company.
The Bottom Line
All said, I remain constructive on META stock and used the dip to add to my own positions, as I find the risk-reward attractive after the recent crash. This is a case of a glass half empty and half full, but I believe it is too early to write off Meta and CEO Mark Zuckerberg in the AI race.
On the date of publication, Mohit Oberoi had a position in: META , GOOG , AMZN , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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