Meta Platforms (META) reported strong Q2 fiscal 2025 results, featuring a 22% sales increase to $47.5 billion and an operating margin rise of 500 basis points to 43%. The firm’s capital expenditures are projected to grow to $69 billion, largely driven by investments in artificial intelligence (AI). Despite investor concerns over macroeconomic challenges affecting digital ad sales, Meta’s ad business demonstrates resilience, benefiting from superior return on ad spending. The integration of AI tools has led to increased user engagement on platforms like Instagram and Facebook, attracting more advertisers and enhancing conversion rates. Consequently, Morningstar raised its fair value estimate for Meta from $770 to $850. The expansion of ad services on Threads and WhatsApp presents additional revenue-generating opportunities. Overall, we view Meta’s stock as marginally undervalued following this robust performance, affirming confidence in its strategic focus on AI-driven monetization.
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