Meta Platforms, Inc. (NASDAQ:META) remains in the spotlight amid rising AI spending and investors are looking for the results beyond the Muse AI agent. Jim Cramer called Meta a “monster long” in an October 12 post on X, and billionaire Ken Fisher’s Fisher Asset Management held 6.79 million shares worth about $3.83 billion at the end of the second quarter. The stock ranks sixth on our list of the top 10 stocks Jim Cramer and billionaire Ken Fisher like. Is Muse enough to justify the spending? Let’s analyze.
Ads Are Paying for the Bet So Far
Meta’s AI already shows up in ad sales. Second-quarter revenue grew 28%, ad impressions rose 14% and the average price per ad rose 12%, so Meta sold more ads at higher prices. Its apps reach 3.60 billion people every day, which gives Meta a huge audience to put new AI products in front of. Analysts expect third-quarter revenue growth of about 24%, inside Meta’s guidance of 19% to 25%. At the end of the second quarter, Meta’s cash and securities were larger than its long-term debt.
Meta’s management says the spending has more uses. Zuckerberg said Meta is receiving offers for its computing power at a significant premium to what it paid, which hints at a possible cloud business. Meta has also launched its Meta Enterprise Platform, which bundles the Muse agent, a business agent, a Muse API and Muse Code. Zuckerberg called it the next major pillar of Meta’s business.
What Muse Has and Has Not Shown
Meta launched Muse in September. Sensor Tower estimates 5 million downloads in the US and Canada in 22 days, faster than ChatGPT’s early adoption, and the stock rose 27% in September. Meta began charging for Muse on October 12, with Muse Wonder plans at $20 and $100 a month. It has not disclosed Muse revenue numbers.
Wedbush said Muse looks promising, but that near-term monetization is likely limited. Muse competes with established assistants such as ChatGPT, and downloads alone do not pay for data centers. Click to read our full Muse analysis.
Where the Cash Is Going
The bear case rests on cash. In the second quarter, Meta’s operating cash flow was barely larger than its capital spending, and free cash flow nearly disappeared, falling to under $1 billion. One to two years ago, operating cash flow covered capex about three times. Meta guided 2026 capex to $130 billion to $145 billion and spent about $51 billion in the first half. It gave no 2027 outlook on the second-quarter call, and the stock fell about 10% the next morning. Free cash flow is not expected to recover until at least fiscal 2028.
Profit is under pressure too. Operating margin fell to 31% from 43%, expenses rose 55% on legal charges and severance for the May layoffs, and earnings per share fell 13%. Meta missed second-quarter earnings estimates by about 14%. Analysts expect third-quarter earnings below last year’s, and Meta expects a legal expense of about $10 billion in the quarter.
Who Says the Spending Will Pay Off?
Meta’s management and several bullish analysts say it will. Zuckerberg points to demand for Meta’s computing and the enterprise platform. Bank of America’s checks show Meta’s AI-powered ad targeting is helping advertisers get better returns. Baird’s Ross Mayfield said Muse at least shows that massive AI spending can produce real product value.
Skeptics focus on conversion. IDX Advisors’ Ben McMillan said Meta still has to show how it turns user growth into revenue. Muse alone cannot justify the spending yet, because Meta has not shown any Muse revenue. The ad business pays the bill today. Muse would have to become a large paid product or lift ad engagement to carry the payoff.
What to Watch on October 21
Meta has a record of beating revenue estimates, so the revenue number matters less than the 2027 capex plan, the legal charge and any Muse figures. If Meta gives a 2027 spending plan near expectations and shares Muse data, the stock gets relief. A bigger spending plan with no Muse numbers could extend the pressure, since the stock fell after each of its last two reports. Check out our full earnings setup. Meta Platforms, Inc. has to show on October 21 that its ad business can keep funding its AI bet.
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