Meta Platforms, Inc. (NASDAQ:META)’s shares are down by 22% over the past year and by 9% year-to-date. The stock cosed 7.9% lower on July 30th, after the firm reported its fiscal second quarter earnings the previous day. However, they are up. by 9.4% since then. Cramer, who has mostly praised Meta Platforms, Inc. (NASDAQ:META) in his previous remarks, discussed how it would have to do better in today’s highly competitive AI industry:
“While i was certainly not in love with the Meta quarter the company does have a particular set of skills that still make it worth owning… That said, it’s like the NFL, you gotta make the playoffs. This was not a playoff season.”
As is the case with its big tech peers, the debate for Meta Platforms, Inc. (NASDAQ:META) surrounds its aggressive capital expenditure. The bulls and bears are divided between the future benefits of spending billions to build out expensive AI infrastructure. The bulls believe that the firm’s revenue growth, through a 28% revenue jump which was aided by its average price per ad jumping by 12% and its ad impressions growing by 14%. Using these figures, the bulls point out that the AI investments are translating into advertising growth.
However, during the quarter, Meta Platforms, Inc. (NASDAQ:META) also post $6.18 in earnings per share to miss analyst estimates of $7.22. The earnings miss factors into the bearish debate as it marks a 13.4% annual drop. The earnings miss indicates tighter margins and it plays into the wider concerns about the free cash flow. During the quarter, Meta Platforms, Inc. (NASDAQ:META)’s free cash flow was a mere $784 million – an unbelievable drop over the year-ago quarter’s $8.6 billion. No wonder Cramer thought that the quarter wasn’t the “playoff season.” Additionally, like its big tech peers, Meta Platforms, Inc. (NASDAQ:META) is also part of the race to spend heavily on AI infrastructure. However, the spending doesn’t come with timelines for return.
During Q4 2025, 256 out of 1,041 hedge funds part of Insider Monkey’s database had held a stake in Meta Platforms, Inc. (NASDAQ:META). In Q1, this figure jumped to 262 out of 1,022 funds. Newlands Management Operations LLC was the biggest stakeholder, courtesy of a $5.6 billion stake while Citadel Investment Group bumped its stake by 129% to $1 billion. Meta Platforms, Inc. (NASDAQ:META). is also part of our list of 10 Blue Chip Stocks Jim Cramer is Crazy About,
While Insider Monkey acknowledges the risk and potential of META as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than META that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
